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LIBRARY nf CONGRESS 
Two Oooies Received 

JUL 26 1904 

Cooyrfsrht Entrv 

CLAS& ^ XXo. No. 

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COPY B 






Copyright, 1904 

BY 

M. W. Hazen 



INDEX OF CONTENTS 

Index of Contents 3-6 

Preface 7 

Cut 8 

IN GENERAL 

Causes of Failure and Success 9 

The Need of this Book 11 

Stock Speculation -Legitimate 11 

Trading on Credit 11 

Overtrading -...:...-... 12 

Advice to Eeaders 13 

Take Small Eisks at First 14 

WALL STREET 

History and Description of Wall Street. .. 15 

The Exchanges 17 

The " Curb " 21 

The Stock Exchanges 23 

Stock Posts 23 

Various Securities 28 

Stocks— How Classed 28 

Indebtedness Prior to Stock 29 

WALL STREET'S METHODS 

Orders— Buying for Cash 33 

Transfer of Stock 34 

Buying on a Margin 35 

Interest 36 

Dividends on Stock Carried for You 36 

Sold Out 36 

Short Sales 37 

Bulls and Bears 37 

Loan Crowd 39 

Buying In— A Corner 40 

Opening an Account 40 

3 



Eights of Brokers to Close a Deal 41 

Eeports of Trades 41 

Bucket Shops 41 

GUIDES TO SUCCESSFUL TRADING 

Universal Market Movements 42 

The Long Swing 42 

Wall Street Anticipates 43 

Bull Movements Checked 43 

Regular Periods 44 

The Short Swing 44 

Simple Fluctuations 46 

Successful Speculation an Art and a Science 47 

STOCK MOVEMENTS 

Regular Ebb and Plow 47 

The Laws of Cycles 48 

A Knowledge of these Laws Necessary. ... 49 

How to Study Cycles 50 

Luck vs. Knowledge 50 

Past, Present and Future Movements 50 

Cycles Compared 52 

The Probable Future 54 

Dangerous Symptoms 57 

Favorable Symptoms 58 

MANIPULATION 

The Wheel Within a Wheel 59 

Preparations for a Bull Market 60 

The Market Goes Up 60 

Insiders Sell— The Public Buys 60 

The Regular Game 61 

Rallies and Declines 62 

Our Natural Inclinations 62 

SELECTION OF STOCKS 

Low or High Priced Stocks 63 

Active or Inactive Stocks 65 

4 



Widely Distributed— Closely Held 65 

Market Leaders 66 

Small Eegular Gains 68 

MARKET RECORDS 

Charts 70 

Eeactions 75 

AX ALLEGORY 

The Eoad to Success 76 

GUIDES BY THE WAY 

Sign Posts 78 

Volume Days 79 

After Advances or Declines 79 

Beginnings of a Bull Market. .' 80 

Minor Movements 80 

SYSTEMS FOR TRADIXG 

Pet Schemes 81 

A.— Safety Scale Trading Xo 1 82 

^.—Illustrated and Explained 84 

The Key to A -7 

B.— Safety Scale Trading Xo. 2 88 

C— Eegular Scale Buying 89 

D. — Scalping Trades Xo. 1 90 

D. — Illustrated and Explained 91 

E — Scalping Trades Xo. 2 92 

F.— Pyramiding 93 

G.— Testing the Market Xo. 1 94 

H. — Testing the Market Xo. 2 96 

I. — Special for Cereals 101 

I. — Illustrated and Explained. . ... 102 

Eeading the Tape 105 

PROTECTIOX AGAIXST LOSSES 

Privileges 108 

Puts and Calls 108 

5 



Forms of Privileges 109-110 

Privileges Illustrated and Explained Ill 

Stop Loss Orders 112 

A Few Good Rules for Traders 114-118 

OTHER EXCHANGES 

Speculation in Cotton 118 

Chicago Board of Trade— Cereals 120 

Table of Quantities, Commissions, etc 123 

Table of Margins, Profits, Losses, etc 124 

CLEARING HOUSES 

The Stock Exchange Clearing House 126 

Receive and Deliver Tickets 127 

Brokers' Clearing Sheets 129, 130 

The Associated Banks 132 

Proof Sheets of Clearing House 134 

Clearing House Certificates 135 

Obtaining Loans 136 

Bank Statement 140 

FOREIGN EXCHANGE 

Money and Its Uses 142 

Bills of Exchange 142 

RULES AND REGULATIONS 

Delivery of Stocks 145 

Endorsements, etc 146-152 

Delivery of Bonds 153 

Registered Bonds 154 

" Can I make Money in Wall Street? » . .155-158 

Wall Street Idioms 159-168 

Composite Charts Showing Yearly Move- 
ments 169-172 

Sample Chart Page 173 

Tables Showing Yearly Movements. . . .174-179 

Wall Street Financiers 180-192 

6 



pretace 

This Book has been written as an In- 
structor and Guide in Investments, as well 
as in Speculation. 

It is the outgrowth of many years of 
profitable trading, following years of doubt- 
ful results, during which the knowledge 
necessary for success was gained by costly 
experience. 

Knowing the need of such a work, both 
to give information to the General Public 
in regard to matters of universal interest 
concerning financial methods, and to dis- 
cuss intelligently the real foundations of 
successful trading, the author has at- 
tempted to outline briefly, but clearly and 
fully, the Art and Science of Wall Street's 
Mysteries and Methods. . 

"Read, not to contradict nor believe, 
but to weigh and consider/" 





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Causes of ffailure an& Success 

Why do so many men fail to gain success in 
business ? Why do so many speculators lose 
their money in Wall Street? 

Why have you been generally unsuccessful 
both in speculation and in your investments in 
Stocks and Bonds? 

-•> 

The answer to all these questions is the 
same. 

Failure has been the inevitable result of 
a lack of knowledge of the fundamental 
principles that regulate, control, govern and 
ensure success. 

Doctors, Lawyers or Ministers, before en- 

. * 9 



tering their professions, spend long years in 
studying, and in digesting the knowledge 
they gain. The more thorough the prepara- 
tion, the greater the probability of success. 

The average speculator rushes into the 
stock market, ignorant not only of the laws 
that govern its fluctuations, but of the 
manipulations of the huge spiders that 
weave their webs to catch the unwary fly. 

You probably have followed the same 
foolish course, and have been caught and 
hurt. 

Success in stock speculation can only 
be assured by long and practical experi- 
ence, aided by a thorough knowledge of 
values, of economic laws and of the system 
of manipulations that carries prices to ex- 
tremes in either direction. 

In order then for you to be in a position 
that will justify you in risking your money 
in Wall Street, you must either gain this 
knowledge and experience by independent 
speculation, which will undoubtedly prove 
very costly to you, or you must be guided at 
first by those who have had such experience, 
and who have learned the many moves in 
the great game of stock speculation. 
10 



XLbe HeeD of tbte JSoofc 

This work has been prepared by one 
whose success in Wall Street, and whose 
knowledge of the foundation principles of 
stock speculation, justify him in offering it 
to the public as a reliable, instructive and 
valuable guide, to those who desire to gain 
success by careful research and preparation, 
— as well as a Study of Wall Street that 
will be interesting to all classes of readers. 

Stock Speculation id ^Legitimate 

Buying and selling stocks is as legitimate 
a business as dealing in real estate. Thou- 
sands buy lands and houses at extravagant 
prices and sell them later at a loss. Others 
buy them when prices are low, and later 
sell them at a profit. The reason for the 
success of one, and the failure of another, 
lies in the knowledge or lack of knowledge 
of the trexd of values as well as the real 
value of the property. 

Grafcing on Credit 

If the buyer can not pay the entire 
amount for the property, he pays a part 

ii 



down and runs in debt for the balance. He 
is doing business on credit. 

The amount paid is the margin neces- 
sary to make the trade safe. 

Trading in stocks is carried on in ex- 
actly the same way. You buy 10 shares 
of stock at $100 a share, pay $1,000 for it 
and it is delivered to you. Ten days later, 
you find you can sell this stock for $110 a 
share. You do this, deliver the 10 shares 
to the buyer and receive $1,100 giving you 
$100 gross profit on the transaction. This 
is speculation exactly the same as in your 
real estate transaction. You buy land, 
goods, stock, expecting to sell at a higher 
price. 

Ovetttabing 

Too often this word, speculation,, is used 
to mean a venture involving unusual risks 
with a chance for unusual profits. 

This overtrading, taking too great risks, 
is the curse of business, of manufacturers, 
and of Wall Street, This causes hard times, 
panics, and failures of business firms and 
of corporations. It should be avoided by all 
who desire moderate but continued success. 

T2 



The temptation to overtrading is greater 
in Wall Street than in real estate, because 
trades are so much more easily made, the 
profits may be much greater, and the trad- 
ing done on the payment of only a small 
part of the purchase money (called mar- 
gin), the rest being carried on credit the 
same as in any business. 

Men in business often buy far beyond 
their means, because they believe they will 
make good profits. Sometimes they put up 
no margins, and the seller takes all the risk 
of loss. Too good credit has ruined thou- 
sands in business. 

a&vtce to IRcaDers 

Avoid overtrading in anything, and espe- 
cially in Wall Street. Never risk more 
than you can lose without suffering. If 
you make a venture involving unusual risks 
for the sake of great profits, be sure that 
you will not be ruined if you fail, as you 
probably will. 

Keep out of speculation until you have 
mastered this work, unless you are guided 
by the advice of a successful speculator. 
Do not follow friendly tips, nor advice of 

13 



Brokers. However well meant, these tips 
are generally bad and will cause you loss. 
Tips are usually given out to mislead, and 
Brokers are often so influenced by their 
market connections, as to be unable to un- 
derstand the market movements. 

Cafte Small "Risks at jffrst 

Never risk at first all you can afford to 
lose. Start in a small way and be satisfied 
with moderate gains. 

Thus if you conclude to speculate, and 
have $1,000 you can afford to lose, begin 
with only $100. Put that with some thor- 
oughly responsible Consolidated Ex- 
change Broker, and deal only in ten share 
lots. Trade only on the plans stated and 
explained in this book, and, on no account, 
put up more money with your Broker until 
you have lost the $100 already deposited. 
Have it distinctly understood and stated by 
your Broker, that this $100 shall cover all 
losses on your transactions. Thus your 
risks will be small, while, if you are suc- 
cessful, your profits will increase your de- 
posit (margin) with your Broker. 
14 



If, before you begin speculating you have 
mastered this work so as to gain success, 
your profits will soon enable you to handle 
more stock, but never try to do too much 
trading on small margins. 

By following this advice, even if you lose 
the first $200 or $300, you will, in a few 
years, before you have lost the $1,000 you 
started with, have gained enough knowl- 
edge to enable you to become successful, 
if you study hard and learn by experience. 

It will add greatly to your chances of suc- 
cess, if you are guided by the experience of 
a successful Wall Street man, but even then 
you should study this book, and by com- 
paring his advice with your conclusions 
drawn from this book, try to understand 
the method followed by your guide. 

With this preliminary advice you will 
now be prepared to study this work. 

TOflall Street 

WiMt tbe Wame Ifnclufcee 

Wall Street is a short, narrow street lead- 
ing east from Broadway in downtown New 
York. It was at one time about the north- 

15 



ern limit of safe settlement on Manhattan 
Island, and a wall, or stockade, was built 
there across the island to protect the few 
settlers from the Indians. 

In the Eighteenth Century, all the prin- 
cipal banks were located on Wall Street, 
the United States Sub-Treasury was estab- 
lished there, and it became the banking cen- 
ter of the city, and, in fact, the financial 
center of the nation. But banks and brok- 
ers increased, until Wall Street could no 
longer accommodate them, and they spread 
through New Street, Broad Street, Nassau 
Street, and up and down Broadway, until 
Wall Street is little more than a name to 
indicate the great financial center of the 
city, and, indeed, of the Nation. 

Gathered here in an area scarcely a mile 
square, are the five great Exchanges, the 
Clearing House, scores of State and Na- 
tional Banks, Trust Companies, offices of 
great corporations, numberless bankers and 
brokers, and the United States Sub-Treas- 
ury, Assay Office and Custom House, as 
well as the great leaders of the industrials 
and railroads. 

All the great European capitals have 
16 



similar financial centers. Thus Lombard 
Street is the Wall Street of London. 

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Dealings in stocks, bonds, grain, pro- 
visions, coffee and cotton, are carried on by- 
countless brokers, who act as agents for 
buyers and sellers. 

These brokers have offices and rooms for 
customers, where orders are received, ac- 
counts kept, etc. Many of them have large 
blackboards on which the varying prices of 
stocks are constantly shown. 

The actual buying and selling are done 
in large halls or rooms in buildings called 
Exchanges. Xo broker can deal through 
any Exchange unless he is a member of it. 
In !New York there are five leading Ex- 
changes, the Xew York Stock Exchange, 
the Consolidated Stock Exchange, the New 
York Produce Exchange, the Xew York 
Cotton Exchange, and the Coffee Exchange. 
.These Exchanges usually own their own 
buildings, which are arranged in such a way 
as to facilitate trading among members. 
They operate on similar lines and some 
brokers are members of several exchanges. 

17 



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On this board the first four lines show the 
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the stocks on the previous day. 

On board No. 2, the quotations run from 
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On some boards nearly all stocks are 
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others, only leading, active stocks are shown. 

Names of stocks are indicated either by 
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Sometimes the stocks are grouped under 
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they are arranged alphabetically. 

Some brokers show on their boards every 
transaction of leading stocks, indicating 
repeated sales by lines under the quotation. 
Thus, B. 73, with three lines under the fig- 
ures, means, four sales at 73. 

19 





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20 



Zbe Curb 

'■ The Curb " is outside of any Exchange 
and is made up of " Curb-stone Brokers " 
who simply gather each day in Broad Street 
to deal in stocks and bonds not dealt in on 
the regular Exchanges. 

Curb-stone brokers do not confine their 
trades to any particular hours, although 
they meet regularly during ordinary Stock 
Exchange sessions. 

Many Exchange Houses have represen- 
tatives on the Curb, but the Exchanges do 
not recognize sales made on the curb of 
listed stocks or bonds. 

When the officials of any corporation 
wish to have its securities dealt in on the 
Exchange, they make a formal application 
to the officers of the Exchange, with a state- 
ment of the company's standing. If this 
is satisfactory the application is granted 
and the securities are " listed," that is, they 
are enrolled among the securities recognized 
as legitimate to be traded in by members. 

Sometimes several brokers, whose cus- 
tomers want to trade in certain securities 
that are not "listed," ask that dealings in 

21 



them be permitted on the floor of the Ex- 
change. This request is often granted and 
thus securities dealt in on the Exchange 
are divided into two classes — listed and un- 
listed. 

Naturally there are a great many com- 
panies whose securities are not " listed/' 
but still are in more or less demand. A 
certain class of brokers have always made 
a specialty of these stocks, and, finding it 
necessary to have some central place to 
meet for trading, they began to gather in 
Broad Street. But the " Curb " has never 
been organized and therefore you would 
better deal through some regular broker if 
you want to trade in curb stocks, since this 
gives you an assurance that you have not 
been cheated in your dealings, by curb- 
stone manipulations, which are often used 
to give fictitious prices or to corner certain 
stocks. 

Shares are often dealt in on the Curb, be- 
fore they are issued. In such cases the deal 
is made w. i. (when issued). That is, when 
the stock is issued, it will be exchanged for 
the receipt you hold. When a security is 
" listed " its sale ceases on the Curb. 
22 



Cbe Stock Ercbanges 

Each of the Stock Exchanges occupies a 
spacious building in which is a large open 
space called the floor of the Exchange. 
Here the members, representing leading 
brokers, meet at ten a. m. and trade until 
three p. m., excepting on Saturdays when 
trading stops at twelve m., and on holidays. 

The presiding officer sits on an elevated 
platform, where he can see the entire room. 
At exactly ten a. m. his gavel falls and the 
hall is instantly filled with a howling mob 
of brokers who seem to be crazy. They 
shout to each other, shake their fingers, 
make brief entries on memorandum books 
and apparently never stop to rest until at 
exactly three p. M. the gavel again falls and 
the noise is hushed to peace. 

5tocfc posts 

In order to assist members who have cer- 
tain stocks to sell or to buy, posts stand in 
various parts of the Board room, to indi- 
cate where brokers can meet to deal in each 
stock. The stocks dealt in at each post are 
known by figures or letters- 

23 



Cbe Wew Korfc Stock fiicbange 

The New York Stock Exchange grew out 
of the necessities of brokers. Before it was 
formed, when one had stocks to sell and an- 
other wanted to buy, trades were made by 
the brokers or their clerks going from office 
to office to buy or sell, as the case might be. 

Each broker charged whatever commis- 
sion his customers agreed to, for buying and 
selling. This made considerable compe- 
tition. To avoid this, a meeting of twenty- 
four leading brokers was held under a tree 
opposite No. 60 Wall Street, and agreed 
upon a uniform commission for trades. 

This was found so advantageous that sev- 
eral informal meetings were held and, at 
these meetings, considerable trading was 
done. When the brokers' business increased, 
it became almost impossible to carry it on 
successfully in the old way, and, in 1817, 
the Stock Exchange was formally organ- 
ized. 

After several changes in location, it 
finally, in 1865, met in a building opening 
on Wall and Broad Streets, and occupying 
the site of the present Exchange. 
24 



Meanwhile an " Open Board of Brokers " 
had come into existence, and was proving a 
strong rival. The Exchange arranged to 
absorb this in 1869. Then the "Gold 
Board/' which grew out of the dealings in 
gold caused by the depreciation of currency 
during the civil war, was taken in by the 
Stock Exchange in 1879. 

This Exchange is older than the Consoli- 
dated Exchange, which did not deal in 
stocks until 1884, when it " listed " stocks 
and began to compete with the older Ex- 
change. In order to do this successfully its 
brokers allowed customers to deal in small 
lots of ten shares and upwards, while the 
older Exchange did not at least encourage 
speculation in less than one hundred share 
lots. 

The Consolidated charged only one-half 
as much commission for buying and selling 
securities as was charged by the large Ex- 
change, and this made considerable differ- 
ence to the customer. In 1903, the Consoli- 
dated advanced its commission on less than 
fifty shares to one-eighth of one per cent, 
on each transaction, which is the regular 
rate in the large Exchange for all sales or 

25 



purchases. The Consolidated, however, re- 
tained its commission of one-sixteenth of 
one per cent, on each transaction of fifty or 
more shares. 

Another advantage to customers on the 
Consolidated Exchange is that there are no 
interest charges on purchases not carried 
over Sunday, while the Stock Exchange 
brokers charge interest on purchases carried 
over night. 

It is however often more difficult to buy 
or to sell on the Consolidated at quoted 
prices, than on the large Exchange, as the 
Consolidated is greatly influenced by the 
transactions in the Stock Exchange. 

A membership (seat, as it is called), in 
the Stock Exchange, (which is not incorpor- 
ated but is simply a voluntary association), 
ranges in price from about $60,000 to about 
$90,000, depending on the activity of the 
market. There are annual dues, and also 
an assessment for each death, in order to 
pay the heirs of the deceased member a 
gratuity of $10,000. 

Seats on the Consolidated range from 
about $1,200 to about $3,000, according to 
its prosperity. 
26 



Generally speaking Brokers belonging to 
the Stock Exchange are stronger financially 
than those in the Consolidated, but there 
are many members of the latter Exchange 
that are financially strong and reliable. 

A small trader will do better on the Con- 
solidated, but a large transaction can prob- 
ably be carried on more profitably through 
the large Exchange. 

Each Broker has telegraphic and tele- 
phone connections with his Exchange, 
where their representatives are easily 
reached so that orders are promptly given, 
but Board quotations in all offices are of 
sales made on the large Exchange. A ticker 
(which is simply a printing telegraph), 
records on a narrow slip of paper in each 
broker's office, every transaction on the floor 
of the large Exchange, showing the stock, 
the number of shares sold and the price, 
thus: 

A C P S 

44^ . . 200. f . . i 500 . 122 . . 300. I2i| . f 

The code of honor that controls the 
trades on the Exchanges is without its equal 

27 



in any other business. No legal document 
could be more binding than the mere nod 
of a broker on the floor, or "sold" or 
" bought/'' spoken in reply to an ofler of an- 
other broker. These trades are never dis- 
puted however great the loss may be. 

IDarious Securities 
Stocks— 1bow GlasseD 

When a joint stock corporation is organ- 
ized, the ownership of its property is vested 
in the holders of its securities. These se- 
curities are stocks and various forms of in- 
debtedness. Sometimes there are three 
classes of stocks, namely, the common 
stock, the first preferred and the second pre- 
ferred. 

The first preferred (or simply, the pre- 
ferred if there is no second preferred), has 
prior rights over the common stock to divi- 
dends, and, in some corporations, to assets, 
in case of dissolution. 

If the preferred stock is " cumulative," 
its dividends, if unpaid when due, accumu- 
late as a charge against the company, and 
must all be paid before other stock can re- 



ceive any dividend. If it is not cumula- 
tive, it lias no claim for back dividends. 

The second preferred must receive such. 
dividends as it calls for, before the common 
can have any. Usually the preferred is lim- 
ited in the amount of dividend it can re- 
ceive, and, after that is paid, the common 
stock is entitled to the balance. But in 
some companies, the preferred is entitled to 
receive a certain dividend, then the com- 
mon to receive the same, and after that, 
extra dividends are equally divided between 
the common and the preferred. 

In most companies, control rests with the 
common stock, but in some, the preferred 
has equal voting power and in others, nota- 
bly the Rock Island, the control is vested in 
the preferred. 

Naturally, common stock that controls a 
company is more valuable than it would be 
without that power, and it also depreciates 
in value if the preferred is cumulative. 

Indebtedness prior to Stock 

Before a stock is entitled to any dividend, 
all fixed charges must be paid and a certain 

29 



amount reserved to meet extraordinary- 
losses and the natural depreciation of the 
property. After the operating expenses are 
paid and the fixed charges deducted, the 
surplus belongs to the stockholder. 

The " fixed charges " are (a) interest on 
the floating indebtedness; (b) interest on 
the funded indebtedness; (c) rentals; (d) 
taxes, and the sinking fund. Any unfunded 
indebtedness is called the floating debt. 

The funded indebtedness may assume a 
great variety of forms, but not all of them 
appear in most companies' liabilities. 

1. Receiver s Certificates. 
If a corporation is in the hands of a re- 
ceiver, he can issue Receiver's Certificates 
as necessary to keep its business from harm, 
and these certificates have the first claim 
on the property, taking precedence even of 
prior lien and first mortgage bonds. 

2. Prior Lien Bonds. 
These rank next to Receiver's Certificates 
and come before, — 

3. First Mortgage Bonds. 
These bonds, as their name implies, are 
30 



secured by a first mortgage on such prop- 
erty as may be given to insure their pay- 
ment with interest. But their claims are 
subject to those of the two classes previously 
mentioned. 

These may be followed by — 

4. Second Mortgage Bonds, and 

5. Third Mortgage Bonds, 
that simply have what may remain after 
the previous claims are satisfied. 

In some cases these bonds cover only cer- 
tain divisions of a railroad, in which case 
Extension Bonds are issued which are se- 
cured by a mortgage on the extension. 

When a road has several kinds of bonds 
outstanding in this way, it sometimes issues 

6. Consolidated or General Mortgage Bonds, 
in order to retire the miscellaneous bonds 
and, incidentally, generally to obtain new 
capital. Then there are 

7. Debenture Bonds, 
which have no specified collateral security. 
These sometimes carry the right of conver- 
sion into stock, and are then called 

31 



8. Convertible Bonds. 
Next comes 

9. Collateral Trust Bonds, 
which are protected only by the securities 
of other corporations. 

10. Equipment Bonds , 
which are secured by a mortgage on the 
equipment purchased by their proceeds. 

11. Income Bonds, 
which have no security, but have a certain 
dividend only when earned. 

12. Land Grant Bonds, 
which cover the grants made to railroads by 
the government, to aid them in building 
their lines. 

A Bond is a certificate of indebtedness, 
generally bearing interest which is cumula- 
tive, excepting Income Bonds. It should 
state (a) the amount; (b) the time and 
place of payment; (c) the rate of interest 
and when and where paid; (d) the total 
amount of bonds of its class; (e) the se- 
curity if any; (f) and such other terms or 
conditions as belong to the issue, such as 
payment of principal and interest in gold. 
32 



Reports of various corporations should 
include ,all fixed charges, and these should 
be carefully considered before buying the 
common stock, that may be loaded heavily 
with so many burdens. 

Mall Street's ADetboDs 

JBuEtng Gbrouab brokers for Cagb 

There are two methods of dealing through 
a broker in securities " listed " on the dif- 
ferent Exchanges. First, you can buy and 
pay for the securities you want. In this 
case you give a written order for the pur- 
chase to your broker. This order would 
read about as follows, and is simply filled 
in on a printed blank by you. 



* Arnold & Brown, Jan. 7, 1905. * 

700 Wall St., N. Y. * 

* Buy for my account and risk 100 shares * 

* M. O. P. at ninety. * 

* John Smith. * 

* G. T. C. * 

33 



In case you did not desire to limit the 
price paid to ninety, you would write in the 
blank space the words at the market, in- 
stead of ninety, and your brokers would 
buy it for you at whatever price they were 
obliged to pay. Any honest broker would, 
in either case, give you the benefit of any 
drop in price before your order was exe- 
cuted. Thus if your order read ninety, and 
the stock dropped to eighty-nine and one- 
half, you would be charged only that price 
with the commission, which is always reck- 
oned on the par value of the stock, and not 
on its selling price. You would therefore 
have to pay on 100 shares of Missouri Paci- 
fic at $90, $9,000, and one-eighth of one per 
cent, of $10,000 (par value) commission, 
which would be $12.50, on the large Ex- 
change, or one- sixteenth of one per cent. 
($6.25) commission, on the Consolidated. 

Tour stock would be ready for delivery 
to you on the next business day after it 
was purchased, on the Stock Exchange, and 
on the Monday following on the Consoli- 
dated, but the transfer notice on the back 
of the certificate would be left blank. If 
you wanted a certificate made out in your 
34 



own name, this certificate would have to 
be sent by yon, or by your broker, to the 
transfer office of the Corporation, where 
the certificate you bought would be can- 
celled, and a new one issued in your name. 
After this is issued all future dividends on 
the stock would be sent to you by the Cor- 
poration whose stock you held. 

JSugitid on a /Ifcarcun 

The second method is the usual specu- 
lative plan of buying on a margin. This 
is done in the same way as above described, 
except that you neither pay for nor receive 
the stock bought, but leave it, and a cer- 
tain amount of cash, with your broker as 
security for the balance due him. 

Thus if you ordered your broker to buy 
100 shares of Missouri Pacific at ninety, you 
would deposit with him as margin, say ten 
per cent, of the par value of the stock, 
($1,000). 

(In some cases brokers accept less mar- 
gin, and in other cases ask for more, de- 
pending on the rapidity with which the 
stock moves up or down). 

He buys the stock for you, for $9,000, 

35 



charges you with that amount and $12.50 
commission and credits you with the $1,000 
paid, leaving a balance of $8,012.50 due 
him. On this balance he charges you in- 
terest varying according to the prevailing 
rates, from four per cent, upwards, as long 
as he carries your stock. He actually buys 
the stock, pays for it and holds it, but 
credits to you all dividends belonging to it 
while it is so held. If the stock declined to 
eighty-one or eighty-two, your broker 
would ask you to put up more margins to 
protect the stock, and if you refused, he 
would sell it " at the market " and credit 
you with the amount received. 

Thus if the stock dropped to eighty-one 
and was sold out after the interest 
amounted to $50, your broker would charge 
you with cost, commission and interest, 
$9,062.50, and credit you with your margin 
($1,000), and the proceeds of the sales less 
commission for selling ($9,100— $12.50) 
which would be $9,087.50, leaving a bal- 
ance due you of $25. This would make 
your loss on the trade $975.00. 

On the other hand if the stock advanced 
nine points in the same time, your profits 

36 



on the trade would be $825 - $900— *75 in- 
terest and commission). 

5bort 5ales— JBulls— JBears 

There are two classes of traders and 
brokers. One class believes that the prices 
of stocks will go up. They therefore buy 
stocks expecting to sell them at an ad- 
vance. These traders are called Bulls. 

The second class believes that prices will 
go down. They therefore sell stocks ex- 
pecting to buy them back (cover) on a de- 
cline. These traders are called Bears. 

The way in which stocks are first bought 
and then sold, has been explained and is 
easily understood. It is not so easy to see 
how one can first sell a stock that he does 
not control, own, or have in his possession, 
and afterwards buy it back. 

Because neither the operation nor its ad- 
vantage is understood, even by the average 
speculator, there is a great prejudice 
against " Short Selling," which is often 
condemned as gambling pure and simple. 
Besides, there is an element of mystery in 
the transaction, which troubles the specula- 
tor and inclines him to avoid short selling, 

37 



while the natural inclination of mankind 
tends to acquisition and leads to buying 
rather than selling. 

Short Selling is, however, just as legiti- 
mate as buying, as you will understand 
from the following explanation, and in cer- 
tain markets, hereafter described, is likely 
to prove very profitable. 

In Short Selling the stock is actually sold 
and delivered. It is not a mere paper deal, 
but is a legitimate trade in stocks. Your 
broker is your agent. If he buys stock far 
you, some other broker must sell it. If he 
sells stock for you, some other broker must 
buy it, and your broker must deliver it 
promptly to the buyer, or he will be dealt 
with by his Exchange. 

ISTow if you are a Bear on the market 
and wish to sell Atchison at seventy, you 
give your broker an order to sell 100 Atchi- 
son at seventy. The order is telephoned to 
his representative on the Board, and the 
stock is sold. Now your broker must de- 
liver 100 shares of Atchison to the pur- 
chasing broker at a certain time, and must 
therefore get it somewhere. 

There are always on the Board, many 
38 



brokers who are carrying a great many 
shares of stock, and who are glad to loan 
it, if they can make anything by doing so. 
These brokers form what is called the 
u Loan Crowd " on the floor of the Ex- 
change. 

Your broker goes into the " Loan Crowd " 
and borrows from one of them, 100 shares 
of Atchison, giving him as security for the 
loan, $7,000, for which he generally re- 
ceives a specified interest. If the stock is 
plenty, the interest is larger than if it is 
scarce, and sometimes, when it is very diffi- 
cult to find a share of the stock in the 
"Loan Crowd" your broker would receive 
no interest, but would perhaps have to pay 
a small premium for the use of the stock. 

Your broker takes the 100 shares he has 
borrowed, delivers it to the purchaser, and 
the trade is concluded. In a few days, 
Atchison has dropped to sixty-seven, and 
you order your broker to buy 100 shares of 
Atchison at sixty-seven to cover your pre- 
vious sale. He buys it on the Board, de- 
livers it to the broker from whom he bor- 
rowed it, receives back his money and the 
transaction is completed. 

39 



Your profits would be $300— $25 (com- 
mission) = $275. You have no interest to 
pay on short sales. Indeed some brokers 
give large traders a part of the interest re- 
ceived on Short Sales. 

Sometimes it is impossible either to bor- 
row or buy the stock, and then your broker 
must go into the open Board and bid for 
the stock, or, if he cannot get it, settle as 
best he can with the broker to whom he 
sold it. This is called a Corner, and is the 
chief danger in selling short any stock, the 
supply of which is limited. 

When one broker buys, whether for cash 
or on a margin, another broker must sell, 
and when one sells, another must buy. In 
both cases the stock sold and bought is de- 
livered and paid for. One transaction is 
as legitimate as the other. 

©pentna an account 

Having decided upon your broker, you 
deposit with him the amount you are will- 
ing to lose if the trades go against you. 
This is called a margin, and is placed to 
your credit. Brokers generally allow trad- 
ers interest on balances due them, and al- 
40 



ways charge interest on all amounts due 
from customers. 

If the trade goes against you, and most 
of your margin is lost, the broker requires 
more margin from you, and reserves the 
right to conclude the transaction at a price 
that will protect him from loss, if you do 
not increase your deposit. 

Brokers should report all trades made, 
giving the name of the broker with whom 
they dealt. 

You should get a separate report of every 
trade when concluded showing profit or 
loss, as you can understand this better than 
the complicated monthly reports, which re- 
quire an expert to decipher, and prove cor- 
rect. 

There is a class of semi-brokers who run 
what is called Bucket Shops, that neither 
buy nor sell, but " bucket " your orders. 
That is, they assume the risk and pretend 
to have bought or sold according to Board 
quotations. 

They usually charge more commission 
than regular brokers, and make their money 
both from commissions, and from the well- 
known tendency of the public to be on the 

4i 



wrong side of the market. It is usually 
supposed that most of them are not square 
in their dealings, and therefore the mass of 
traders avoid them. 

Their business is illegal, as it is simply 
betting on the course of the market, and to 
that extent, is gambling. 

As you now have a good knowledge of the 
beginning of speculation, you are prepared 
to take up the study of the psychology of 
successful trading. 

©utfces to Successful UraMng 
TZlntveraal Aarftet Movement* 

If you will study the history of the stock 
market, you will find that there are uni- 
versally three distinct, well-defined move- 
ments always in progress. 

Zbe Xottd Swing 

The first and most important for the wise 
and patient speculator, is the great move- 
ment which extends over several years and 
carries prices to extremes of high or low, 
according as the trend has been up or down. 

The length of this movement depends on 
42 



its rapidity, and on the condition of the 
country and its world connections. 

Thus when the nation is increasing in 
prosperity, when exports are large, when 
crops are good and when labor is well em- 
ployed, a Bull market will continue longer 
and carry prices higher than when business 
is depressed and crops are bad. 

A Bull market is also checked, before it 
reaches the limit aimed at by its manipu- 
lators, by the same causes that made it pos- 
sible, aided by the beginning of a natural 
recession in business. 

Thus the great Bull market of 1902, was 
checked before it reached its possibilities, 
in spite of the frantic efforts of rich brok- 
ers and speculators to continue it, because 
the abundance of money looking for specu- 
lative investment, produced such a wave of 
inflated securities as to flood the market, 
use so much of the surplus cash as to raise 
interest abnormally, and cause business to 
hesitate. 

Wall Street always discounts the future. 
It began at once to discount the fall in 
business that was inevitable. Stocks 
dropped more rapidly than they had ad- 

43 



vanced, and the decline discounted a busi- 
ness depression that would not be fully- 
reached for a year. 

A knowledge of this movement is essen- 
tial to the greatest success. These move- 
ments occur in fairly regular periods of 
from eight to eleven years. Bull move- 
ments reached high points in 1864-1872- 
1882-1892-1902. These were followed by 
Bear movements lasting from eighteen 
months to two years. When Bear move- 
ments culminate, there follows a period of 
rest, the country gradually regains confi- 
dence, business improves and stocks ad- 
vance. 

This law of movements will be treated 
fully and illustrated by diagrams, later in 
this work. 

Gbe Sbott Swing 

The second movement is the temporary- 
rallies and declines, a succession of which 
make up the main movement. 

These last from ten days to a month or 
more, and are brought about by large specu- 
lators who think that the movement has 
gone far enough for the time in either di- 
44 



rection, and they are aided by profit taking 
on the part of others. 

This movement is extremely confusing 
to a novice in Wall Street, and is by no 
means a simple one to gauge, even for the 
experienced speculator. 

One must determine whether after a long 
decline, the rally is simply a resting point, 
or the beginning of a Bull market; or 
whether, after a long advance, the decline 
is a resting place, or the beginning of a 
Bear market. 

Great assistance in determining these 
points, is given under the rules and sug- 
gestions made further on in this book. 

There are many signs by which this 
movement may be known, and yet it proves 
too often disastrous for the speculator who 
misunderstands it, and who, therefore, 
takes the wrong side of the market. 

Some of you may have been mislead in 
1901 when the Bull market that culminated 
in 1902, was in progress. The sudden de- 
cline in stocks, increased and prolonged by 
the Northern Pacific corner, was taken to 
be the turning point, and floods of stocks 
were drawn on the market. But the de- 

45 



cline was only a pause in a Bull market, 
and the Bears were caught and punished. 

Simple ^fluctuations 

The third movement is the fluctuations 
lasting from an hour to a week, but gen- 
erally culminating in three days or less. 
The length of this movement, like that of 
the others, depends upon its causes, and its 
promoters. 

It is caused by the operations of floor 
traders, by rumors, by news, and, some- 
times, by the attempts of powerful interests 
to test the market, in order to find out if 
it is ready for a decided movement up or 
down. 

It is generally useless for an outside 
speculator to attempt to make money by 
following these daily fluctuations. His 
broker's commissions will take most of his 
profits when he happens to be on the right 
side, while he loses both the commissions 
and the fractional change, if he is wrong. 

The floor trader, who has no commission 
to pay, can make a profit on a change of 
one quarter of a point, and this trading 
should be left to him. 
46 



If you have read as far as this page in- 
telligently, you will see that successful 
speculation is an Art and a Science, and 
that, like the learned professions, it re- 
quires careful study as well as experience. 

You are therefore the more willing to re- 
ceive the suggestions that follow, in regard 
to the modus operandi of successful specu- 
lation. 

Stocft flDcwements 

•Regular JBbb an& jflow 

Speculative values ebb and flow with a 
degree of regularity that is surprising to a 
novice. After a movement is well under 
way, it is not controlled, to any consider- 
able extent, by the real value of the securi- 
ties dealt in, since the speculator is more 
influenced by activity, than by a knowl- 
edge of values, and yet one should know 
these values, since certain stocks may re- 
sist the movement for a time, being held 
back or neglected by the manipulators of 
the movement, and later, on account of 
their value, or lack of value, offer the best 
opportunity for profits. 

47 



Gbe Xaws of Cycles 

The principal movement, or Long Swing 
of the market, is of great importance. If 
you can follow that correctly, your profits 
will be enormous. 

That this movement has occurred in cer- 
tain fairly regular Cycles, no one can 
deny. That these Cycles have been de- 
termined by similar causes, and that the 
variations from regular periods, have been 
brought about by variations of these causes, 
are equally certain. 

Therefore to arbitrarily measure those 
periods, and to claim that this measure will 
apply to the future, or even that it has al- 
ways applied to the past, is wrong and 
fallacious. 

At the same time the degree of regular- 
ity in these movements is very helpful, in 
studying the probabilities of future Long 
Swings. 

From his knowledge of the past move- 
ments of the heavenly bodies, and of the 
laws that govern them, the astronomer can 
closely foretell their future relations with 
each other. 

With a knowledge of atmospheric condi- 
48 



tions in various quarters of this hemi- 
sphere, the Weather Bureau can, from its 
chart, predict, with surprising accuracy, the 
weather the different sections will have at 
a certain time. 

A change of relative conditions may de- 
flect a storm movement, and may cause 
somewhat different weather from that ex- 
pected, but even this change can be known 
by the observer in a particular section, be- 
fore it reaches him. 

In the same way, a knowledge of the 
laws that govern the general movements of 
the financial heavens, and an understand- 
ing of the relative conditions that may 
affect or cause changes not otherwise indi- 
cated, enable the close observer to prepare 
his chart so as to point out the general 
course of the market. 

There may be hurricanes or tidal waves, 
but, in general, the rocks of disaster are 
plainly buoyed, and, with proper care and 
skillful guidance, a safe port should be 
reached. 

You cannot expect to be entirely free 
from mistakes. No one is always success- 
ful. But you can and should learn how 

49 



best to correct your errors, and should 
change your position promptly, even at a 
loss, when certain that you are wrong. 

The market will not always move in one 
direction. Times, circumstances and con- 
ditions change; they afTect the market; it 
changes, and you must be ready and will- 
ing to change with it. 

On such intelligent forecasts of the 

market, successful speculation is always 

based, excepting in a few instances where 

"luck" may temporarily favor the reck- 

.less. 

The following diagram will show the 
movements of the market in the past, and 
the indications for the future tendency, 
drawn from the past, although circum- 
stances may, and probably will greatly 
modify and change it, since the crops, war, 
labor troubles and many other things may 
accelerate or retard the regular move- 
ments. 

There may be exceptions to every rule, 
but, in general they serve to prove its truth, 
and emphasize its value. The reasons for 
these exceptions are usually understood 
and are helpful in applying it properly. 
50 



From this Diagram it appears that the 
tops of Wall Street movements are reached 
in periods of from seven to eleven years, 
and are invariably followed by liquidation, 
reaction, and business depression. The 
longer Cycles cover periods of from sixteen 
to twenty years, and because they extend 
further, naturally are followed by more 
disastrous results, that leave more lasting 
effects. 

Thus the depressions after the longer 
Cycles culminating in 1872-3 and 1891-2, 
lasted longer and were more disastrous than 
that following the shorter Cycle that cul- 
minated in 1881-2. 

The law of Cycles indicated the boom 
that ended in 1902, and the depression that 
followed. In fact the Boom of 1901-2 is, in 
many respects, analogous to that of 1881-2. 

In each instance the Boom was preceded 
by large harvests, great business activity 
and prosperity with abundant money. 
Properties were loaded with excessive capi- 
talization, and " undigested securities " 
produced financial dyspepsia. 

The reaction due in 1902, arrived on 
time, and was analogous to that in 1882. 
52 



Then the market declined until October, 
1883, when rallies and declines alternated 
until low prices were reached about a year 
later. After that, business began to improve, 
the railroads showed increased earnings, 
and stocks slowly advanced. 

The conditions early in 1904 were bet- 
ter than those in 1884, and unless crops 
failed, or war prevailed, or some unfore- 
seen disaster occurred, the decline should 
not have continued so long or have been so 
severe as that of 1884-5. 

Improvement would be hindered and de- 
layed because 1904 was the presidential 
year, which always disturbs business to a 
greater or less extent, specially if there is 
any prospect of a change of administra- 
tion. But, as the prospects seemed to favor 
no change in the government, unless crops 
failed, improved conditions would be mani- 
fested before 1905, and business would soon 
afterward feel the change for the better. 

This improvement, except for unforeseen 
setbacks, should continue for from three to 
five years, after which there should be two 
or three periods of severe declines, not how- 
ever sufficient to bring prices nearly to the 

53 



level of 1903. These should be followed 
by another upward movement culminating 
in a period of excessive speculation, over 
capitalization, and overproduction in 1912- 
13, when the inevitable results will be a 
much greater decline in prices and business 
than in 1903-4. 

But remember that these changes as in- 
dicated, may be varied by other conditions. 
While in general these Cycle movements 
have occurred with a fair degree of regu- 
larity during the last century, the causes 
that produced and regulated them were evi- 
dent to the student of financial economy. 

These causes are still operating, and, if 
they continue, the same results will follow. 
We must study them and be guided by 
them, rather than by mechanical arbitrary 
periods of time. 

The movements in iron and stocks have 
occurred at fairly regular intervals, and 
panics have, for over a century, in this 
country and for about twice that time in 
England, varied but little from their 
twenty-year Cycles, and the reasons for 
those variations are so plain, as to hardly 
need explanation. 
54 



Thus there were but sixteen years be- 
tween the panic of 1857 and that of 1873, 
but the rush of business and the deprecia- 
tion of the currency caused by the war, 
together with the losses and extreme pov- 
erty of the South, naturally hastened the 
crisis that was inevitable. 

Many financial writers are often misled 
in their conclusions because, in consid- 
ering and comparing movements, they 
assume them to be governed by a single 
cause, when all great movements have been 
brought about by a union of several causes. 
Thus the earlier or later culmination of 
a decline or advance, as well as its extent 
and continuation, is governed to a consid- 
erable degree by influences that had noth- 
ing to- do with its beginning. 

It is a common error, for example, to 
suppose that the panic of 1893 was caused 
by such a change in the administration at 
Washington as threatened to modify the 
tariff. The cause® of the decline that started 
1891-2, were independent of political in- 
fluence, and the results would have been 
reached, even if there had been no presi- 
dential election. 

55 



The change in Administration, and the 
accompanying Wilson-Gorman tariff, to- 
gether with a feeling of uncertainty as to 
what else might be done to affect business, 
increased the effects, and prolonged the 
duration of the depression. 

In the same way, after the decline had 
culminated, a reaction came and would 
have come had the Democrats remained in 
power, but the advance was hastened and 
its results were increased, by the election 
of McKinley, while his re-election in 1900, 
did not hinder the inevitable culmination, 
in 1902, of the upward movement. 

An upward movement was in progress in 
1851, and, in the first part of 1852, it in- 
creased in strength. The same is true in 
regard to 1856, while a good rally in a de- 
clining market came early in 1860. In 
1864, the war had benefited business, and 
the first of that year saw a rapid advance 
that marked the end of the movement, in 
spite of the re-election of Lincoln. 

In 1871, there was a rising market. The 
Presidential election of 1872 aided it to 
rapidly reach its culmination in 1873. In 
1880, the market advanced without regard 
56 



to elections, since there was but little doubt 
as to results. 

In the same way the elections of later 
Presidents have had their natural effects on 
markets whose movements were regulated 
and controlled largely by other causes. 

Dangerous Symptoms 

There are certain indications of a crisis, 
that are an infallible guide. 

Pig iron is said to be " beggar or king," 
and it has been a good barometer to indicate 
the future. At least one year (and usually 
two or three years) before a crisis, pig iron 
begins to go down in price, and, until it 
rallies, the times will not improve. Other 
indications are as follows : 

New enterprises are started in untried 
fields. 

Old companies, either alone or in com- 
bination, are largely over-capitalized, and 
stocks are watered without limit. 

Business is stimulated and there is over- 
production in nearly every line. 

The expenses of corporations are greatly 
increased, salaries are raised, useless posi- 

57 



tions filled with favorites, and extravagance 
rules. 

Speculation becomes rampant, not only on 
stocks but in cotton, grain, real estate and 
business ventures. 

Labor troubles prevail and strikes are hin- 
dering progress. 

To these signs are often added a dimin- 
ishing purchasing power in foreign coun- 
tries, (so that our exports decrease), a with- 
drawal of foreign capital, and a general 
distribution of stock among the people. 

jFavorable Symptoms 

There are also certain conditions that 
tend to prosperity and help to improve the 
times, and you may see better prospects 
when, — the monetary system is fixed on a 
good basis, — the crops are good, — the pro- 
portion of exports to imports increases, — the 
imports are largely raw material or things 
that we do not produce, — there is a greater 
increase of gold production than of increase 
in its use, — there is a fair demand for pro- 
ductions, increasing rather than the reverse, 
— the earnings of corporations show a net 
increase, — the increase of capital is used to 
58 



benefit, expand and perfect old enterprises 
rather than in starting new ones, — labor and 
capital cease quarreling. 

/IDantpulation 

Cbe TKIlbeel Wlftbtn a mbecl 
We have considered some of the factors 
in the movements of stocks, but one of the 
most important has not been mentioned. 
Manipulation is the wheel within a wheel 
that governs most of the fluctuations in 
stocks outside of the long swing. The in- 
siders plan nearly every movement in ad- 
vance. They know the real conditions of 
listed stocks, which conditions the outsider 
is ignorant of. They study the condition 
of business, of money, of foreign nations, of 
crops and of politics. Then they are ready 
to move. 

When they conclude to advance stocks 
temporarily or for a considerable rally, 
pools are formed in certain stocks, bear tips 
are circulated broadcast, money is called in, 
interest is raised, and all the familiar Bear 
news is printed in the papers, talked over 
in brokers' offices, scattered 'round in finan- 

59 



cial reports and reproduced in " letters," 
and the public are induced to sell all they 
have, and more. 

Certain stocks, generally those of intrin- 
sic value, are selected to lead the advance, 
while others are let alone, and still others 
are forced down, in order to conceal the 
fact that a Bull market is under way. 

The leaders usually move rather slowly at 
first, and then they go up more rapidly, 
while the low priced stocks begin to show 
that they are becoming affected by • the 
movement. 

After the leaders have nearly reached 
their tops, the minor issues are taken up by 
insiders, while the public are buying the 
stocks that have already had their advance. 

By this time, even the lambs know that 
a real Bull market is in progress, and they 
rush in to buy. For a time everybody 
makes money. Brokers are crowded with 
orders. All tips are Bullish. The papers 
see no clouds in the sky. " Buy, buy, buy," 
is sounded even by old Trinity's chimes. 

Meanwhile the leading stocks have been 
strongly held, but the insiders have been 
unloading on the public, who have been 
60 



tumbling over one another to get stocks. 
When the stocks have been pretty thor- 
oughly distributed, the market halts, goes 
up half a point, then down a point or two, 
and then up again. 

" Only a natural rest or a little reaction 
in a Bull market," the brokers and tipsters 
say. " A is going twenty points higher ; B 
will touch 200/' etc., and yet the market 
halts. Manipulation has ceased. The mar- 
ket soon naturally begins to drop. 

(Eemember that all upward movements 
are manipulated. Stocks never go up of 
their own accord. The market declines when 
it is not supported. Usually all campaigns 
end on great-volume days.) 

Now that support is withdrawn, the mar- 
ket will naturally decline, but many out- 
siders are still buying. They must be sup- 
plied with all the stock they want. There- 
fore insiders begin to sell short. All bids 
are taken. No one cries in vain for stock. 

Soon, bad news begins to circulate. Poor 
prospects for crops. Decreased railroad 
earnings. Tight money. Gold exports, and 
the thousand and one rumors are spread, 
that are put out to frighten the public. The 

61 



Bear market is under way. Day after day 
it gathers force. Brokers demand more 
margins from the lambs who still look for 
a grand recovery. By and by the public 
begins to take its losses. Then, when the 
bottom is in sight, it sells short. By this 
time the insiders cover their shorts, get 
ready for an upward turn, and the same old 
game is played again. 

A few outsiders learn to play it correctly, 
but the masses never will understand that 
they must buy when stocks are cheap, and 
sell when they are high. Besides, there is a 
new flock of lambs to be sheared every year. 

•Rallies anD Declines 

These movements are, of course, attended 
with frequent breaks on a rising market, 
and with as many rallies in a Bear market 
as may be necessary to catch " stop loss " 
orders, to shake weak followers out, or to 
induce the public to come in on the wrong 
side. 

®ur flatucal Inclinations 

We naturally feel timid about buying 
stocks after a big decline, when it looks as 
62 



if there were no depths to which they might 
not descend, or to sell them at the top, when 
they seem to be bound out of sight. 

Our inclination is to follow the crowd, 
especially in a Bull market. Manipulators 
take advantage of this weakness, and we are 
led to buy when we ought to sell, and to 
sell, when we should buy. In fact if the 
outsiders would always do what they think 
they ought not to do, they would stand a 
better chance to make money. 

If you learn to read the signs of the mar- 
ket, so as to know what its manipulators are 
doing, and then refuse to be misled and con- 
fused by feigned movements and flying ru- 
mors, you will be much better prepared than 
most speculators to act wisely on your 
trades. 

Selection of Stocfcs 
%o\v or 1btgb prtceD Stocfee 

You have already learned that, at the be- 
ginning of a campaign (Bull or Bear), you 
should select for your trades the high-priced 
stocks of intrinsic value, as they will move 
first, and that, towards the end of a move- 

63 



ment in either direction, you should get out 
of these stocks and deal in minor issues. 

Whether you should confine your trades 
to a single stock or not, depends on circum- 
stances. Some speculators will assure you 
that, if you scatter, (deal in several stocks), 
you will certainly lose money, while others, 
with equal confidence, will tell you that it is 
wise to trade in several stocks, in order to 
stand a better chance of making something 
on one of them. 

If your margins are small, deal in but 
one stock and in small lots of that. 

If you have followed the movements of 
one stock in particular, and know its ups 
and downs, and its real value better than 
you know other stocks, deal in that stock 
only. 

If, on the contrary, you have large mar- 
gins, and have studied carefully three or 
four stocks, deal in as many of them as you 
think best, when they reach your price 

AND VOLUMES. 

Remember that the market will not dis- 
appear. Like the poor, it will always be 
with you. You will always have the op- 
portunity to trade. Act, therefore, only 
64 



when you are certain that it is wise to act. 
You are not obliged to trade every day. 

Bctive an& inactive Stocks 

You will notice that certain stocks have 
good movements and fair volumes daily. 
These are the best stocks for quick trades, 
because you are always sure that you can 
sell or buy them almost as soon as you give 
the order, and you can judge better of their 
immediate movements, than of the fluctua- 
tions of the inactive stocks. 

Stocks — TOt&elB Distributes — Closely 
1belfc 

Some stocks are widely distributed, that 
is there is a large number of shareholders. 
Others are closely held by a few financiers. 
The latter may lead in a Bull movement, 
while, in a Bear market, the former decline 
the most rapidly, after they get started 
downward. 

Therefore select the widely-distributed 
stocks for short sales. If the steel stocks 
had been owned by twenty big capitalists, 
they would not have gone down as fast nor 
as far as they did go. 

65 



You will also find some stocks that are so 
closely held as to enable the owners to cre- 
ate an artificial scarcity of them in order to 
" squeeze " the shorts. These stocks can 
not, at times, be borrowed from the " Loan 
Crowd," and may command a premium, 
even if they can be borrowed. 

Be careful not to sell these shares short, 
because, if there is any considerable short 
interest in them, insiders may refuse to 
loan them. Then your broker would not 
be able to get them, the shorts would be 
" squeezed," and made to pay high for the 
stock, or be obliged to settle on extortionate 
terms, as in the celebrated Northern Pacific 
corner. Remember, however, that a squeeze 
seldom lasts more than three days and that 
the stock may then drop even lower than it 
was when the " squeeze " began. 

d&arftet Xeafcera 

Certain stocks are selected by manipula- 
tors as leaders of the market. St. Paul and 
Steel were made the leaders in 1903. You 
can usually choose the leaders by noting 
the volumes for a short time. 
66 



In 1904, Paul seemed to be the guide, 
and, " as goes Paul, so goes the market " 
was a Wall Street proverb. Other stocks 
will be added as leaders, and Paul may be 
displaced, but there will always be one or 
more leaders that will correctly indicate the 
general movement. 

At first select an active stock and deal 
in that only. Keep a record of its move- 
ments (with several more as advised later), 
up or down, together with its volumes. If 
you find that each movement carries it to 
higher levels, wait till it breaks sharply, 
and then, if it does not reach its last low 
bottom, buy a small lot of it. When it 
rallies, sell it out at its previous top or a 
little higher, and wait for it to decline 
again before buying more. 

This will give you experience, and teach 
you how to decide in regard to movements, 
and to act independently of reports and ru- 
mors. 

If you buy ten shares of a stock, and it 
still goes down, buy ten more two points 
lower and sell when you have a clear profit- 
on both lots, unless you decide that the 
stock is really going much further down, in 

67 



which case, instead of buying the second 
lot, sell the first at about one-quarter below 
the previous bottom, and wait, before trad- 
ing further, until you have got your bear- 
ings again. 

The complete systems that will prove 
your best guide, in buying and selling, are 
fully explained later in this work. 

Small Regular Gains 

Perhaps you think that this beginning is 
too small for you to make much money in 
your trades. Well, even so, it will also pro- 
tect you from making big losses when you 
are learning, while if you are successful, it 
will be the beginning of a fortune. 

It is much better to gain a little each 
month, than to lose considerable each week. 
" Haste makes waste," is a true proverb. 

If, beginning with twenty share lots, you 
win but one point a month, in ten years, 
allowing your profits to be added to your 
margins, and increasing your trades pro- 
portionately, you will have made nearly a 
million dollars, as shown in the following 
table. 
68 





Points 


Number of 




Margins 


Profits 


Shares 


Total Profits 




Yearly 


Handled 




$200 


12 


20 


$240 


$440 


12 


40 


$480 


$920 


12 


100 


$1,200 


$2,120 


12 


200 


$2,400 


$4,520 


12 


1,000 


$12,000 


$16,520 


12 


1,600 


$19,200 


$35,720 


12 


3.500 


$42,600 


$78,320 


12 


8,000 


$96,000 


$174,320 


12 


17,000 


$204,000 


$378,320 


12 


37,000 


$444,000 


$444,000 








$822,320 


Total 


am't at the end of ten y'rs. 



This table shows the possibilities of con- 
servative trading on ample margins, begin- 
ning with only $200 and taking no great 
risks. 

A thorough study of this work, careful, 
safe trading, and a fair amount of business 
common sense, certainly should enable one 
to average a single point a month on the 
number of shares traded in. 

In fact, in a good market, one should 
often clear a single point in a week or less, 

69 



which, using profits as margins, would, 
without pyramiding, amount to nearly a 
million dollars in less than three years. 

This illustration is given, not to encour- 
age speculation, but to prove that large 
profits daily are not essential for great suc- 
cess. On the contrary, those who attempt 
too much, will make too little. Be careful, 
conservative, and satisfied with small trades 
and sure profits at first, and do not risk 
these for more. 

"He that hasteth to be rich shall 
surely come to want." " 

/iDarfoet IRecor&s 

Charts 

Charts are simply a bird's-eye view of 
market movements. Properly kept, studied 
and understood, they are of great value. As 
usually kept, they often mislead and are 
misread and harmful. 

So few speculators understand how to 
keep Charts and still less how to read them, 
that financial writers usually decry their 
value. Some, however, who have made 
70 



more of a study of systems than others, ad- 
mit their place and u§e. 

Thus the celebrated financial writer, Ed- 
ward A. Bradford, says " Markets have their 
moods and rules just as certainly as values 
have their laws. For those who profit by 
trading, good market judgment is more 
essential than correct estimates of values. 

" The very point is that the market has 
abnormally divorced itself from values as 
determined by yield in proportion to price, 
and is concerned more with the relation be- 
tween the weight of the buying or selling, 
or with the excess of supply of securities in 
proportion to the capital available to absorb 
them, or with sellers' necessities. 

" At such times it is instructive to note 
whether the rise or the fall is the more per- 
sistent, whether the activity and volume cor- 
responds with the advance or the decline, 
and whether the turns of the market obey 
such considerations, or alter with apparent 
changes of intrinsic conditions. 

" In other words these are times when 
market students are concerned more with 
the market as a whole, than with the merits 
of specific properties. 

7i 



"It is a time pre-eminently adapted for 
the study of averages and Charts, which 
throw no light on values individually, but 
are an aid .to estimating the trend of busi- 
ness which has lost its bearings and is in 
process of finding itself. 

"It is aliunde to say that such lore is 
worthy only of gamblers. It serves their 
turn, to be sure, but it will also avail to save 
bona fide buyers from the chagrin of pay- 
ing more than they need, or of accepting 
less than might be had, if the sales were 
placed on a rising instead of on a falling 
movement." 

This is very true, and those who claim 
that Charts have but little value, are those 
who do not know how to keep them, and 
who still less realize that the key to the 
knowledge they give, must be gained by a 
study and comparison of the varying condi- 
tions that always accompany stock move- 
ments. 

A Chart to be of value, should be a record 
of the daily movements of three or four 
leading Industrials, and of at least ten 
leading Kailroads. To these should be 
72 



added minor stocks, when you begin to 
trade in them after the movement in the 
leaders is over. 

The Chart should show the daily tops 
and bottoms and volumes of each stock, 
and the total daily market volume of all 
sales, as well as the weekly and monthly 
gains or losses, and volumes. 

A sample Chart page is given later to 
illustrate methods of keeping and reading 
it, as it is useless to keep a Chart unless one 
can interpret its meaning. In order to do 
this, you must study the causes of the vary- 
ing movements, and, uniting the two sources 
of information, become competent to read 
" between the lines," the plain writing that 
is invisible to the careless observer. 

If you keep a Chart properly, you will 
notice that the market is moving in a cer- 
tain direction. This may indicate the first 
movement (the Long Swing), or the second 
movement (the Short Swing), previously 
described. When each top is higher than 
previous tops on leading stocks, and the 
bottoms do not touch previous low prices 
made after the rally began, you may buy 
stock on every drop and close it out when 

73 



the next top, a little higher than the last, is 
reached the second time. 

Thus, if Atchison has made tops and bot- 
toms as follows, — top sixty-five — bottom 
sixty- two and one-half = top sixty-six and 
one-half — bottom sixty-f our=top sixty-eight 
— bottom sixty- four and one-half you could 
begin to buy at sixty-five, and could sell 
your purchase at sixty-eight and one-half to 
sixty-nine. 

If the tops advance about the same 
amount in each rally, and the differences 
between bottoms decrease, as in the illustra- 
tion given, you may feel quite certain that 
you should sell your holdings at about the 
last top. Then if the next top shows a 
marked decrease from previous advances, be 
careful how you buy the stock, as the move- 
ment may halt or be over for the time. In- 
deed if the last top is touched' twice, and 
the stock halts and hesitates, you should at 
once sell your holdings, and perhaps, sell 
short on a scale up, for at least a temporary 
decline. 

That is, if Atchison stopped at sixty- 
eight, on the second movement, you should 
have sold all your stock and about one-third 
74 



as much more. Thus, if you hold sixty- 
shares, sell it at sixty-eight to take your 
profits, and also sell twenty short. Then if 
the stock drops to sixty-six, cover it. If it 
advances to seventy, sell twenty shares 
more, and at seventy-two twenty more. 
Cover all this stock on one point average 
profit, if the market moves down slowly, but, 
if it drops rapidly and easily, after it has 
reached your lowest selling price, (sixty- 
eight), put a stop loss of one point from the 
lowest point touched and let your profits 
run. 

Stop Loss orders, and buying or selling 
on a scale, are explained under Systems of 
Trading. 

■Reactions 

In an advancing market, a reaction will 
always come sooner or later, and will gen- 
erally be from one-third to one-half of the 
last advance. Thus, if Atchison, in the 
above deal, began to move up from sixty and 
reached sixty-eight before a reaction came, 
it should drop to sixty-six at least, and per- 
haps to sixty-four, before the next upward 
movement began. To be safe, you should 

75 



cover at sixty-six, or put a stop loss of a 
point, so as to ensure some profit. Then, if 
it jreached sixty-four, you should cover your 
short sales and begin to buy on a scale down. 
Remember that, while fluctuations occur 
daily, their extent in either direction de- 
pends on whether the movement of which 
they are a part, is an advance or a decline 
in a longer or shorter general movement. 

En Blieaors 

XLbe "RoaD to Success 

Mr. Smart set out one day to go to Suc- 
cessville from Saf etown. He knew the gen- 
eral direction and had a road map to guide 
him. Besides there were sign posts at all 
cross roads, and they were usually easily 
read. 

He found at first, the road broad, smooth 
and pleasant, and his horse trotted rapidly 
along towards his destination. 

His journey was so delightful that he 
failed to notice the guide posts at the cross 
roads, but drove along merrily, thinking of 
the good time he would have at Success- 
ville. 
76 



Suddenly his horse began to stumble, his 
carriage bumped against huge rocks and 
stumps, and dark clouds hid the face of the 
sun. 

Before he had time to realize what had 
happened, his horse was down in a bog, 
his carriage was upset and broken, and he 
was thrown out into the mud and mire. 

He staggered to his feet, and, with great 
exertion, managed to get his poor horse on 
solid footing, but the harness was broken, 
the carriage was utterly ruined, and, do 
what he could, not even a wheel could be 
saved. 

So, making the best of a bad matter, he 
started homeward on foot, leading his horse. 
As his eyes became accustomed to the dark- 
ness, he found he was not alone. Groans, 
curses, complaints of ill luck and moans 
of the injured filled the air. On every side 
of him were scores who had started, as he 
did, with fair prospects in the morning, but 
who had misread the signs, or had carelessly 
pushed on, until they fell into the same 
bog that had caught him. 

Some had saved their horses; others had 
recovered horses and carriages, but the har- 

77 



nesses were broken and the carriages nearly 
ruined; while still others were not able 
even to' extricate themselves from the dread- 
ful slough. 

Those who were able, picked their way 
back to Safetown as best they could, de- 
termined never to go outside its borders 
again. The others, left in the mud and 
mire, never came home. 

Haec fabula docet that those who believe 
the road to Success ville is straight and 
plain, and who do not study their guide 
books, or ask the way, or read the sign 
posts, will invariably go wrong to their own 
hurt. 

©ufoes b$ tbe Way 

Stem posts 

Watch the volumes of sales on leading 
stocks. If there are but few shares sold 
when the price declines, while the volumes 
increase on an advance, the market will 
probably go up. 

If, after a decline or a dull market, the 
rallies exceed the declines both in points 
and volumes, you may look for higher prices^ 
78 



as this indicates accumulation of stock by 
insiders or pools, preparatory to an ad- 
vance. 

When the public is buying, you may be- 
gin to sell, and when the public sells, you 
may buy. 

When a market advances slowly, and 
everybody is waiting for a reaction before 
buying, generally the advance increases in 
size and volume, and the market has an 
extended movement. 

When, after a decline, the market has 
had only slight fluctuations for some time, 
and then come two or three very dull days, 
you may conclude that few stocks are being 
pressed for sale, and that the market is near 
bottom. If then the leaders advance with 
increasing volumes, a fair rally will prob- 
ably set in at once. 

When the public is universally short, 
stocks are put up to make the shorts cover. 

Wall Street anticipates. When good 
news is expected, buy stocks, but sell them 
as soon as the news becomes a public cer- 
tainty. When bad news is expected, sell 
stocks, but cover when the bad news is all 
out. 

79 



After a long and severe decline, when the 
air is fnll of rumors of failures, tight 
money, damaged crops, etc., ad lib., and the 
market seems to be on the verge of a panic, 
note the bottoms, and buy with great con- 
fidence, when these bottoms are again 
reached. 

Rallies occur in every Bear market, but 
the turn in the tide comes, and a Bull mar- 
ket begins, when a semi-panic causes liqui- 
dation and lowest prices are reached on 
largest volumes. 

When a new movement in either direc- 
tion, goes further than the last similar 
movement, it generally returns to the last 
top or bottom before it goes far beyond it. 

In a Bull market, when the second move- 
ment has brought a rally of from five to 
fifteen points, — a day of large volumes, 
great excitement, and pronounced advances, 
will mark the temporary top of that Swing, 
and perhaps the end of the Bull market. 

Minor movements in either direction, cul- 
minate in from three days to two weeks. If 
stocks have moved up or down for three 
days continuously without a reaction, and 
with increasing volumes, especially if those 
80 



days are Friday, Saturday and Monday, 
with the greatest movements and the larg- 
est volumes on the last day, take the other 
side of the market at the extreme price of 
Monday, and you will have quick, good 
profits. 

However market leaders move, minor 
stocks are sure to follow them to a less de- 
gree. 

Gossip is manufactured to suit manipu- 
lation. If you heed it at all, go contrary to 
it. 

Always trade on large margins. Buy on 
good breaks and sell on good rallies. 

If you deal in a doubtful market, always 
protect your trade with a stop loss, but it 
is better still to let such markets alone. 

Systems for TTta&inQ 
pet Schemes 

You will hardly find an old Wall Street 
speculator who has not a pet system which 
he believes to be good, even if it is not 
infallible. The more money he has lost by 
using it, the more certain he is that the 



system is good, and that the fault, when it 
does not work, is his. 

Every System has its good points in 
favorable markets, and its weaknesses under 
unfavorable conditions, and no System is 
worth a moment's notice, unless handled 
with due regard to market conditions. 

Tecvt the various Systems given, and your 
judgment and skill in using them, theoret- 
ically, by selecting two or three stocks and 
following the Systems for a week, from the 
quotations of stocks selected, without doing 
any actual trading. This should show you 
which plan is best for you, and also prove 
whether vou can use any of them success- 

fully. 

B — Safety Scale Grafting *lo, t 

To use this System you must have large 
margins. $1,000 will amply margin trades 
beginning with ten shares, and $500 would 
be plenty in four cases out of five. 

With $1,000 margin you should make a 
profit nine times out of ten, if you follow 
the System exactly, even if you make some 
blunders in your conclusions that a tempor- 
ary top or bottom has been reached. 
82 



After a severe decline, when the leaders 
are down from five to fifteen points on the 
last movement, and the minor stocks have 
declined proportionately, while the whole 
market seems weak, and the volumes are 
large, if you think the bottom has been 
reached, select your stock that has had a 
good decline on large and increasing vol- 
umes, and buy ten shares. 

If this stock has been going down three- 
fourths of a point or more a day, for two 
or three days before you buy, take on 
twenty shares more two points down, forty 
more at four points down and eighty more 
at six points down, if the decline extends 
so far without a rally of two points, which, 
however, will not be the case once out of 
twenty times. 

If the movements have ranged from one- 
fourth to one point daily for a week or more, 
and have suddenly increased in extent to 
from one to two or three points in a single 
day, with a corresponding increase in vol- 
umes during the last two or three days, espe- 
cially if those days are Friday, Saturday 
and Monday, you can buy the twenty, forty, 

83 



and eighty shares on declines of a single 
point instead of two points. 

If yon have judged correctly, and really 
began to buy near the bottom, and the stock 
advances so that you bought only ten shares, 
buy more stock on advances, using Systems 
B, C or F, or take your profits after a few 
points rise, or put a stop loss one point be- 
low the highest price reached, and let your 
profits run. 

The following illustration will show how 
to carry out this System. 

Atchison had gone down to sixty. I 
thought it might go lower, but that it would 
certainly rally later several points. So I 
bought 

10 Atchison at 60 

20 " " 58 

40 " " 56 

80 " " 54 

It went lower than I expected, as there 
were severe attacks on the market by Bears, 
causing much liquidation, but I knew there 
must be a good rally, and was ready to con- 
tinue buying down to fifty, if the decline 
extended so far. 

It stopped at fifty-four and began to rally. 
84 



I was sure it would go to sixty at least, and 
held my stock for that figure. As I was 
carrying only 150 shares, I planned to buy 
more on the advance. 

When the stock touched fifty-six, I bought 
forty shares more. (You can see that at 
fifty-six I had a gross profit on all my 
trades of $80, so that I had plenty of mar- 
gin). At fifty-eight I took twenty shares 
more. When it reached fifty-nine I put a 
stop loss of two points below the market, 
and stopped buying. At sixty-six, I sold 
out all my stock making my profits as fol- 
lows : 

■ Sold at 66 — Profit $6o 

" " 66 " 160 

11 '■ 66 " 400 

11 "66 " 960 

" " 66 " 400 

" " 66 " 160 



10 At. 


b't at 60 


20 " 


'« " 58 


40 " 


" " 56 


80 '■ 


» «• 54 


40 " 


M .. 56 


20 <4 


" " 58 



Gross profits $2, 140 

Interest and commission 74-50 

Net profits $2065.50 

In this deal I was very conservative, but 
I believe in taking as few risks as possible, 
and, when I began to buy, everybody was 
bearish, and I had only $lj500 margin. 

85 



If I had followed my own system, I 
should have largely increased my profits. 
I really ought to have bought eighty shares 
more when the stock advanced to fifty-eight, 
— forty more at sixty, — twenty more at 
sixty-two, and ten more at sixty-four, keep- 
ing a stop loss order at two below the high- 
est point reached, in order to protect my 
profits, which were large enough to margin 
all new purchases. 

After following Penn. down from 157 to 
120*4, I thought it ought to rally. Volumes 
were large, the price was about that guar- 
anteed by the Underwriters, and the public 
was largely short of the stock. So I bought 

10 Penn. at 120^ 
20 ■■ " n8£ 
40 " " n6£ 

From this point there was a further de- 
cline of less than two points, so I bought 
no more. It rallied weakly, and I con- 
cluded from my records, that it would not 
rally much. So when it touched 118% I 
sold all of my stock, making profits as fol- 
lows : 
86 



io Pa. b't at i2o| — S'd at n8| — Loss $15.00 

20 •■ •' " n8i " " n8f— Pr'fit 10.00 
40 " " •' 110J '■ " n8f " 1 00.00 

Gross profit $95.00 

Interest and commission 23. 50 

Net profits $71.50 

The key to this System is big margins, 
small beginnings, sufficient nerve to adhere 
to the plan as long as your records and 
judgment agree that you are on the right 
side, and sense enough to take small profits 
when you conclude you are wrong. 

The safety of the System lies in the fact, 
that, after big movements in either direc- 
tion, on large and increasing volumes, the 
market will, in nine cases out of ten, move 
a couple of points or more in the other di- 
rection BEFORE IT GOES MORE THAN FIVE OR 
SIX POINTS FURTHER IN THE DIRECTION IT WAS 

moving before you bought. Any speculator 
will consider nine chances out of ten, all he 
could ask for and more than he could ex- 
pect. 

This System is equally good on the Short 
side after rallies. 

87 



3B — Safety Scale Grading Ho* 2 

When you are not positive that you are 
right in your conclusions as to future move- 
ments, but believe that the chances are in 
your favor, sell or buy, as directed under A, 
but take profits quickly when in sight. 

Thus in my trade in Atchison, if I had 
been " on the fence," when the stock rallied 
from fifty- four to fifty- six, I should have 
sold the eighty shares bought at fifty-four, 
taking $160 profit. If it had continued to 
rally to fifty-eight, I should have sold the 
forty shares bought at fifty-six, taking $80 
profit, etc. On the contrary, if, after taking 
profit at fifty-six, it had dropped to fifty- 
four, I should have bought back the eighty 
shares. If it again rallied to fifty-six, I 
should have again sold it, while if, instead 
of rallying, it had gone down to fifty-two, I 
should have bought 160 shares. If there 
was a rally to fifty-four I should have sold 
out 160 shares, or if I thought the chances 
about even for a move in either direction, 
should have closed out all my stock at from 
fifty-four to fifty-five. At fifty-four I 
should have still had a gross profit of $280, 
88 



while at fifty-five my gross profit would 
have been $570. 

You will readily understand that your 
profits will be much larger, if the market 
goes a point or two against you, than other- 
wise, and that these Systems really " Or- 
ganize victory out of defeat." 

C — "Regular Scale JBuBfng 
Under similar conditions to those men- 
tioned in the first two paragraphs of A, buy 
a small lot of the selected stoek, and the 
same amount on each point decline. Then 
either take one point profit on each pur- 
chase, and buy back the same amount if it 
drops again, or hold all the stock until you 
have a clear point profit on it. Then either 
sell one-half of your holdings, to catch a 
part of the profits, and hold the rest for a 
further advance, or put a stop loss one 
point below the highest price reached, and 
let your profits run. This System reversed, 
applies equally well to the Short side. 

Which of the two suggestions given 
above you select, will, of course, depend on 
your settled conclusions from your record, 
as to the real course of the market. 

89 



In this System, in order to ©scape with- 
out loss if your premises are wrong, you 
will see that the price of the selected stock 
must rally more than half of its entire de- 
cline after your first purchase, so that, if 
a stock dropped eight points after you be- 
gan to buy, it must rally about four and 
one-half points for you to get out square, 
while, under Systems A and B, if it rallied 
two points you would have a profit. 

D — Scalping GraDes Ho. t 

Every active movement in either direc- 
tion, includes a great many fluctuations of 
from one to two points. 

Sometimes a stock will cross a certain 
figure several times before it finally moves 
up or down. Thus in the winter of 1904, 
Paul crossed 142 many times without going 
above 146, or below 139. 

Room traders, having no commissions to 
pay, can take profits of one- fourth or one- 
half a point, but the ordinary trader should 
get at least one point clear, or let the mar- 
ket alone, and it is far from being a safe 
or a profitable venture, to try to catch these 
profits " on the fly." 
90 



However, as you may be inclined to take 
risks for the sake of small profits, I will 
outline the best System for scalping the 
market. 

Decide on the general movement of the 
stock, up or down. If it is up, begin to 
buy at the lowest figure (not fraction) that 
has been crossed several times. Buy less 
than you can safely carry at that figure, 
and then buy as much more every half point 
down. Consider each purchase by itself, 
and sell it on one point clear profit. Buy it 
back if it drops again to the last buying 
price. Limit the entire number of shares 
to be bought, so as to always have 10 per 
cent, margin on your entire holdings. 

If the market is a declining one, reverse 
the plan, and sell rather than buy the 
selected stock. In using this plan when I 
got tired of waiting for a substantial move, 
and " wanted to do something " anyway, I 
traded as follows : 

Bought 50 Paul at 141% 

Bought 50 Paul at 140% 

Bought 50 Paul at 139% 

The stock then rallied to 141% and I sold 

the last fifty shares at 141 1 / 4, giving me a 

9i 



gross profit of $62.50. The price rallied fur- 
ther to 142%, and 1 sold fifty more of my 
shares at that price, giving me a gross 
profit of $75. 

It continued to go up and I bought fifty 
more at 142%- This gave me 100 shares. 
Between 143 and 144, the system would in- 
dicate both buying and selling, and, there- 
fore, I simply held my stock. This con- 
tinued to be the case as the stock went up, 
and I held the 100 shares until the price 
reached its previous top. Then I sold fifty 
shares, put a stop loss of one point on the 
remaining fifty shares, and waited results. 
The price reached 145%, reacted to 144%, 
and then again touched 145%, when I sold 
it out, and waited for it to go down again to 
my buying figures. 

IB— Scalping Gra&es *to, 2 

Select the low figures that have been 
reached several times, on a certain stock, 
as in D. Also note the highest point the 
stock has reached on the last three upward 
movements. 

If the tendency is upward, begin to buy 
at the lowest figure named, and buy as 
92 



much more on every point down or up, until 
it has advanced to within one point of its 
previous top. Then put a stop loss of one 
point on your holdings, and wait. 

When your trade is closed, if the stock 
moves as much above its last top as that 
was above its predecessor, and is strong on 
increased and large volumes, sell it short 
on the same plan. 

jp — f>sramtt>f ng 

In order to be successful in the use of 
this plan, it is absolutely necessary to know 
the general movement of the market, and 
particularly to understand the range of the 
stock or stocks handled. 

When you are positive that a Bull move- 
ment will soon begin and that stocks are 
very near bottom, buy what you can margin 
well, and wait for tne movement to com- 
mence. 

After each rally in a Bull market, there 
is generally a decline of from one-third to 
one-half the advance last made. On this 
reaction, buy more stock, using your profits 
as margins. Continue to do this on each 
reaction, until a day is reached of enor- 

93 



mous volumes, and most favorable Bull 
news. Then sell all your holdings when the 
top is reached the second time, and sell 
short for a temporary drop at least. 

On the right side this System gives very 
large profits. The great trouble is that the 
speculator will be too grasping, and will 
wait too long before taking his profits. 

S — Zcetim tbe jflfcarfcet mo. 1 

Some stocks have their own movements 
at times quite independent of the general 
market. This has often been the case with 
Sugar, Amalgamated Copper and the Trac- 
tions. 

In order to judge correctly as to the ex- 
tent of such movements, it may be neces- 
sary to test them, and the following Sys- 
tems will guide you in doing this. 

After one of these stocks has had a con- 
siderable movement in either direction, a 
reverse move of from two to three points 
usually indicates a change in the general 
movement, preceded by a partial recovery. 

B. R. T. had moved from below 30 to 55. 
Then it dropped to 52%- I thought this 
indicated a decline and, when it rallied to 
94 



53%, I sold 100 shares. It went to 51^ and 
then rallied to 52%. I sold 100 shares 
more. It declined to 51, and I took profits 
(1% points) on my last sale. It continued 
to go down and touched 48^2 • Then it 
rallied to 49%? and I sold 100 shares more. 
This I later bought in at one point profit. 
The price then dropped to 48 with large 
volumes, and I covered the rest of my sales 
with fair profits. 

If the stock had moved less rapidly and 
with smaller volumes, I should have sold 
more, when, after it dropped to 48, it rallied 
to 49. But, as the trading indicated some 
considerable rally, though not a reverse of 
the downward movement, I thought it 
would be better to buy for two or three 
points rally, which I did. 

You, no doubt, now understand the Sys- 
tem which, in brief, is as follows: 

When a special stock has had a good up- 
ward movement, and then has dropped 
from two to three points, sell it on a point 
or a point and a half rally. After each suc- 
ceeding decline of two points or more, sell 
more shares on a rally of one half the de- 
cline. Consider each trade separate from 

95 



the others, and cover each lot (except the 
first) on one or two points profit, according 
to the average extent of the declines; Con- 
tinue these trades until a day of large 
volumes, and then cover all your stock. 

If the volumes are very large, go long for 
a point or two rally, but do not wait too 
long on the rally before you take your profit. 
Remember, though, that the rally may be a 
reversal of the movement, and if it extends 
to three points, drops less than that, and 
then touches a new top, buy again on a drop 
of one-half the last rally, and continue to 
buy for rallies reversing your trading from 
the selling side. 

When you believe the tendency of the 
market is reversed, move cautiously and 
protect your trades by a stop loss of one 
point or one and one-half points, since the 
market may have gained an impetus, that, 
while carrying it temporarily further, will 
exhaust itself quickly. 

ft — Gesttna tbe dftarfcet Ho. 2 

In a trader's market, when prices have 
moved up and down for some days, without 
much change, and then drop steadily but 
96 



slowly for two or three days, or rapidly for 
a single day, closing at the lowest, if they 
open lower on the following day and seem 
weak, buy one-fourth of what you can 
safely carry. If a rally comes, take your 
profits when the market has gained its pre- 
vious loss, if the volumes justify it, but 
otherwise put a stop loss to protect the trade 
and wait for a fair volume-day before sell- 
ing. 

If, aft-er you buy, the market does not 
rally, but continues to drop, buy as much 
more, one point down. If then there is no 
rally, put a stop loss five-eighths below your 
last purchase, and, if the stock goes there, 
take your loss. 

Then wait until the decline is appar- 
ently over, and buy again, following the 
same plan as before, only deal in twice as 
much stock. 

If you have misread the market again, 
you will lose on this trade also, but should 
try it the third time in the same way, buy- 
ing now three times as much stock as on 
your first deal. 

After three such drops, you would be 
fairly sure to be on the right side and to 

97 



have a rally of a couple of points or more, 
which would, at least, save you from loss on 
the three deals. 

On a rising market, you would, of course, 
reverse your trading, and sell, instead of 
buying. 

The Brokers often test the market to see 
how far they can carry a movement, When 
the extreme points of September, 1903, 
were reached, there followed a natural 
rally. Brokers and bankers who were 
loaded with stocks began to test the market 
to see how far this could be carried to give 
them an opportunity to unload. 

Their tests showed them that they would 
have to buy a large amount of stock in 
order to rally it much beyond the natural 
reaction, and that there was but little pros- 
pect of outside buying to any extent. 

Therefore, when their test was completed, 
they began to sell the stocks they had 
bought and, in a few weeks, prices dropped 
of their own weight on small sales to about 
the lowest level of 1903. 

It is remarkable how quickly each rally 
that followed produced a crop of Bulls, who 
reasoned as follows: 

98 



" The prices dropped to extremely low 
levels in 1903 because a semi-panic com- 
pelled a sacrifice of all classes of securities. 

" When active liquidation had run its 
course, a normal market should begin and 
stocks should gradually move upward until 
at least, good dividend payers reached an 
investment level. 

" It is not natural that stocks paying, at 
market prices, fiYe, five and a half or six 
per cent, on the investment, should sell for 
any length of time at such low prices, 
when money on call is one and a half or two 
and a half per cent., and' time money is as 
low as four or four and a half per cent." 

In this course of reasoning the Bulls 
overlooked the underlying facts that 
checked successive attempts to turn a 
simple rally into a rising market. The buy- 
ing power of the market was extremely 
limited and could not, if it would, respond 
to the enticements of the Bulls. 

The confidence of investors and specula- 
tors in both the real value of these stocks, 
and in the ability of manipulators to cause 
a sustained rise, had been pretty nearly 
destroyed for the time. 

99 



The enormous amount of bonds that had 
been hanging over the market, vainly await- 
ing offers to buy, increased the public dis- 
trust of the value of stocks, and by seizing 
every dollar of investment capital that 
came in sight, even at extravagant interest 
and commissions, constantly reduced the 
amounts of money that might otherwise 
have been put into stocks. 

Then, the money class understood that 
the rates of interest on money loans were 
low, because those who had money thought 
it safer to wait for lower prices, and to let 
it at mere nominal rates while there was so 
little demand for it, and at the same time 
believed these low rates would not continue 
longer than speculation began, or than 
usual demands for money were made. They 
thought that if there was money enough to 
justify such low rates of interest, it would 
be quickly used in buying up at least a 
part of the seven or eight hundred million 
dollars worth of stocks and bonds that rail- 
roads were not able to dispose of on any 
terms. 

Then, when the public began to look back 
a few years, and to remember the prices of 
ioo 



the various securities that were, in 1904, 
called cheap, they were fearful that the old 
times would return again and that corpora- 
tions would not earn enough to continue 
their dividends. 

Besides all these things there were mil- 
lions on millions locked up in " undigested 
securities " that the financial stomach 
found it hard work to dispose of without a 
long rest and considerable stimulant. 

Add to this the fact that all classes of 
investors, from the billionaire down to the 
clerk and teacher, were induced to invest 
as largely as their means allowed, in secur- 
ities that promised well, but that had 
rapidly depreciated, until interestless and 
almost valueless, they had left their holders 
no usable capital, and certainly one had 
found reasons enough for the continued de- 
pression and doubtful recoveries that 
marked 1903-4. 

f — Special for Cereale 

The various Systems herein described are 
adapted to speculation in stocks, cotton, 
cereals and coffee, each of which must be 

IOI 



carefully studied before attempting to 
speculate in them. 

One must know the crops (whether 
larger or smaller than usual), the prospects 
for future harvests (whether better or 
worse than last year), the surplus left over 
from preceding years, the demand (whether 
more or less than in other years), foreign 
production and demand, and last but not 
least, the intention and purposes of the con- 
trolling speculators, since certain men are 
generally leaders in these deals, and a single 
leader can control them far more than stock 
deals. 

When you thoroughly understand these 
points, you are pretty well prepared to deal 
in cotton, or cereals, as well as in stocks. 

When, for example, after studying the 
wheat question, you are positive that wheat 
is too low, and that the leaders are accum- 
ulating it, wait until the next decline cul- 
minates. 

If the bottom is not so low as the last 
one, buy 1,000 bushels, when after a rally, it 
touches bottom figures a second time, or 
comes quite near them. 

If it continues to drop after you have 
102 



bought, and goes below previous bottoms, 
cover at a loss and wait until the new bot- 
tom is reached a second time. Then buy 
2,000 bushels. If a third drop is below the 
last bottom, repeat your trades, buying 
3,000 bushels. Xow, if you were right at 
first in regard to the actual trend of the 
market, the price will not often go below 
your second bottom, and will rally several 
points before it reaches a new top. 

When it does this, declines from three- 
fourths to one and one-half points, and then 
rallies to that top a second time, sell your 
wheat and wait for another considerable 
drop before buying again. 

Wheat touched 76, rallied to 76 3 4, and 
then dropped to 76%. I bought 2,000 
bushels. It went up to 76^ and then 
broke to 76, and I covered at a loss. It still 
declined and reached 75*4, rallied to 75 3 4 
and then dropped to 75%. I bought 3,000 
bushels. The next move carried it to 78*4 
when it declined to 77%, and then rallied to 
78V 2 . 

Feeling sure it was going higher, I 
waited. It hung around 78^ to 78% for 
three days, and then went to 79%. After a 

103 



drop of a point, it rallied to 79^, when as 
it seemed weak, I sold my 3,000 bushels, 
making a good profit on the two trades. 

By thus increasing the quantity bought 
after each loss, you are fairly well assured 
against final loss, unless you were decidedly 
wrong in regard to the trend of the market. 

The same System is equally good for the 
short side, after a rally has culminated in 
too high prices, or when the manipulators 
want prices to drop in order to " shake out " 
little followers. 

After a wild advance in price of grain, 
comes usually a serious break of at least 
one-half or two -thirds the advance, followed 
by a sharp recovery of about half the break, 
when liquidation has run its course and the 
shorts begin to cover the oversold market. 
After which the price usually drops to 
nearly the low figures of the previous break, 
or even a trifle lower, and then the market 
becomes unsafe for traders. 

If the market is a naturally rising one, 
the prices hold firm for a day or two and 
then go higher. 

If the market is bearish, the prices are 
weak at first and then go down still lower. 
104 



This is the same principle as was de- 
veloped in stock trading. 

Kemember that no System is good unless 
handled carefully, skilfully and with good 
judgment, and never adhere to any one 
System blindly and unreasonably. 

IRea&inQ tbe Uape 

The Tape gives many valuable hints in 
reading the market, and tells not only the 
volumes, but indicates fairly well the tem- 
porary course of stocks, by showing whether 
buyers or sellers are most urgent. 

Thus, if after a few minutes active trad- 
ing in Atchison, with prices varying from 
sixty-six and one-quarter to sixty-seven, 
trading almost stops in that stock at sixty- 
six and one-half, with two or three sales 
made at that figure, and then the tape reads, 
— 300 At. sixty-six and three-fourths — 500 
At. sixty-six and seven-eighths — 1,000 At, 
sixty-seven — 600 At. sixty-seven and one- 
eighth, you will readily understand that, as 
no stock could be bought at sixty-six and 
one-half, the buyers, being more urgent 
than the sellers, raised their offers gradually 
to sixty-six and three-fourths — sixty- six and 

105 



seven-eighths — sixty-seven — sixty-seven and 
one-eighth, taking all stock offered at each 
rally. 

This showed either a decided movement 
to cover shorts, or an accumulated buying. 

Now follow the course of a stock for a 
few days, as shown in the papers that give 
every transaction. Make a summary of the 
totals sold on declines, and of the totals 
sold on advances, leaving out all but the 
first sale at any quotation, and sales of less 
than 100 shares, and you will have a pointer 
showing somewhat the relative strength and 
urgency of buyers and sellers on that stock. 

You must also take into considera- 
tion the results of trading as shown in ad- 
vances or declines. If a stock shows that 
there are more, and more urgent buyers 
than sellers, and yet it goes up only a trifle, 
there will be less prospect of a further ad- 
vance, than if it goes up several points. And 
sometimes a large preponderance of either 
buyers or sellers, with only a fractional 
change in price in the other direction, will 
show that the market has been held near 
the central figures by strong interests, in 
order to cover shorts, or to unload stocks, 
106 



before a further change which insiders 
know is coming. 

Sugar had been hanging round 126% for 
several days on small volumes. On Thurs- 
day 7,200 shares came out on trifling de- 
clines, while 15,100 shares were sold on 
small advances, and the stock closed at 
126%. 

The large increase in volumes and bal- 
ance, and the trifling advance in price, 
showed me that big interests were holding 
up the market to unload, because they knew 
that the stock was going down. 

I therefore sold 100 shares of Sugar at 
126%. The next morning it opened up to 
127, and slowly went to 127% with large 
volumes. I sold 100 shares more at 127%. 
It wavered up and down one-eighth — one- 
fourth — one-eighth, etc., and then began to 
break. I sold 100 shares more at 125%, and 
100 more at 123%, using my profits as mar- 
gins. When the stock touched 122%, I put 
a Stop Loss one and one-half points from 
the market, and waited. It broke 120 before 
it rallied a point, and I closed my trades at 
119%. 

Tou will understand that one must read 

107 



between the lines to know what the manipu- 
lators are going to do. The general public 
will not take the time to study how to read 
the tape or the signs of the market, and 
therefore are easily deceived, and are led to 
do just what insiders want them to do. 

When Sugar was strong and tipsters 
freely predicted 140 for it, insiders were ap- 
parently unloading and the public was buy- 
ing. When I thought I saw good evidence 
of this, I sold, with the above results. 

protection Bgainst Xosses 

fl>ut6 anD dalle 

There are Brokers in all large financial 
centers, who deal in guarantees against ex- 
cessive losses in buying or selling stocks. 

These guarantees (Privileges) are called 
Puts, Calls, Spreads, and Straddles. A Put 
is a contract giving the holder the right to 
sell to the maker a certain number of shares 
of a given stock at a fixed price, before the 
date named in the contract. 

A Call is the reverse of a Put, and the 
maker agrees to sell to the holder a certain 
number of shares of a given stock, at a fixed 
price, before the date named in the contract. 
108 



A Spread is a Put and a Call combined. 
The maker agrees to sell to or to buy of the 
holder, a certain number of shares of a 
given stock before the date named in the 
contract, on the terms specified therein. 
Form of a New York Call 



New York, Jan. 10, 1905. 
For value received the bearer may 
Call on me on one day's notice, except 
the last day, when notice is not required, 
for 100 shares of St. Paul at 142^, any 
time within forty-two days from date. 
All dividends for which transfer books 
close during said time, to go with the 
stock. 

Expires Feb. 24, 1905, 2:55 p. m. 
(Signed) Brown & Smith. 



A Put is like the above Call, substituting 

" DELIVER TO " for " CALL ON." 

A Straddle is like a Spread except that, 
in a Spread the buying and selling prices 
are several points apart, while in a Straddle 
they are put at the same figure. 

109 



New York brokers sell Puts and Calls at 
a few points from the market, and give 
holders the right to close them at any time 

Form of a Spread 



New York, March 7, 1905. 

For value received the bearer may 
Call on me on one day's notice, except 
the last day, when notice is not required, 
for 100 shares of Atchison at 67, or may 
deliver to me the same number of shares 
at 62, any time within thirty days from 
date. All dividends for which transfer 
books close during said time, to go with 
the stock. 

Expires April 6, 1905, 2:55 p. m. 

(Signed) Brown & Smith. 



on a day's notice (excepting on the last 
day). London brokers sell them at the 
market price, charge more for them, and 
do not give holders the right to close them 
excepting at fixed times near the end of the 
contract limit, 
no 



In some States trading in Privileges is 
illegal, but generally it is permitted. 

Privileges are sold for various lengths of 
time, from one day to several months. They 
are accepted by brokers as margins, instead 
of cash. 

In active markets, large profits can often 
be made by using Puts and Calls, with but 
little risk, since you can limit your losses 
to the amount paid for the Privilege, and 
can often make many trades, before the 
Privilege expires. 

In New York the operation is as follows : 

If you think Atchison, when selling at 
seventy, will have a considerable decline, 
you would buy a Put on it. Probably you 
would get a Put at sixty-six, good for thirty 
days for $100 for 100 shares. This would 
really make the price at which you could sell 
it, sixty-five. 

Now, if Atchison goes below sixty-four, 
you can do one of four things. (1) Close 
your Put and make $100. (2) Wait for 
lower prices which will give you more 
profit. (3) Buy fifty shares at sixty-four, 
which insures you at least $50 profit on 
your trade and gives you a chance for more, 

in 



since if your fifty shares advance to seventy 
you have $300 profit on them, and can take 
this without interfering with your Put, 
which still gives you an opportunity to do 
the same thing again if the stock drops. (1) 
Buy 100 shares at sixty-four, which will 
limit your profit to $100 if the stock goes 
down, but give you $100 profit on every 
point advance. 

Which plan you ought to follow, depends 
on the condition of the market. 

I have made seven trades on a thirty-day 
Put on 100 shares of Steel Preferred at fifty- 
two, with net profits of over $1,100. I 
bought a Call on it at sixty, for $150, at the 
same time, and lost that amount as the stock 
did not touch sixty during the time. That 
left my profits on the Spread over $950. 

Caution. If you deal in Privileges, be 
sure they are signed by a strong concern, 
and that your broker will accept them in- 
stead of margins. 

Stop XO00 ©rDers 

When a speculator does not want to risk 
too much, on account of the uncertainty of 
the market, or when he has a certain profit 

112 



in sight, and wants to be sure that it will 
not be changed to a loss, he uses the Stqp 
Loss Order. 

To illustrate. If you buy Sugar at 125, 
and desire to protect yourself against ex- 
cessive loss, provided it takes one of its 
erratic drops, you will give your broker a 
written order to close out your Sugar at, 
siay, 123%, if it goes there. 

Then if the stock goes up, as you ex- 
pected, you have your profits. Even if it 
goes to 124 and then rallies above 125, you 
still have your trade in hand. But if it 
goes to 123 % your broker will sell the stock 
at the best price he can get for it, and you 
must stand your loss. 

It is sometimes impossible to close out a 
deal at the figure named, but generally this 
can be done. In the case above supposed, if 
the price dropped to 123 VL there might be 
no buyers. Then your broker would take the 
best bid for your stock he could get, and 
close your deal, charging you with the cost 
of the stock, with interest and commissions, 
and crediting you with the amount he re- 
ceived from its sale. 

On Short Sales a Stop Loss is placed 

113 



above the selling price, and your broker 
buys in the stock if the price reaches the 
Stop Loss figures. 

Stop Loss orders are good until cancelled, 
unless otherwise stated in the order. 

When your Stop Loss is reached and your 
trade is closed out, it is often best to dupli- 
cate your trade at the apparent extreme 
touched. 

I bought 100 Copper on Oct. 5, 1903 at 
40% with a Stop Loss at thirty-nine. It 
went there and lower and I lost two full 
points. It continued to drop and when it 
touched thirty-four, less than two weeks 
later, on a volume of over 100,000 shares, 
I bought 1,000 shares at thirty-four and 
one-eighth, with a Stop Loss at thirty-two 
and five-eighths, carried it until December 
29, and sold it at fifty-one and one-quarter. 

a jfew <3oo& IRulee for Grafcere 

1. In the beginning of a movement, deal 
only in the better class of stocks. They lead. 
Others follow later. 

2. Avoid short sales in stocks that can 
be easily cornered. 

114 



3. Wall Street anticipates expected news. 
Therefore sell before bad news is made pub- 
lic, and buy before good news is announced. 
After the news is confirmed, close your 
trades. 

4. Pay but little attention to " tips," ru- 
mors, gossip or newspaper talk, but depend 
on your conclusions, reached from a study 
of this book and from your records, 

5. When the public is buying largely, sell. 
When the public is selling in big volumes, 
buy. 

6. Always have large margins. 

7. Bull movements begin after severe de- 
clines, when everything is darkest, and the 
market is dropping rapidly, with enormous 
volumes. 

8. Buy then with confidence, when the 
bottom figures are reached the second time. 

9. If extreme points are reached after a 
continuous decline lasting three days, with 
constantly increasing volumes, especially if 
these days are Friday, Saturday and Mon- 
day, a rally will almost invariably follow, 
even if stocks open lower on Tuesday. 

10. When you have a profit in sight, take 
it or protect it by a Stop Loss, and when the 

ii5 



market looks doubtful to you, always, if you 
trade, use a Stop Loss. 

11. If you conclude you are on the wrong 
side of the market, take your loss quickly, 
and wait until you are certain what to do. 

12. Bear markets begin after a consider- 
able rise when the news, rumors and " tips " 
all indicate further advances, and when the 
public is buying. Then, after a three-days- 
continuous advance, with constantly in- 
creasing volumes, especially if these days 
are Friday, Saturday and Monday, a de- 
cline will certainly start before the end of 
the week. 

13. A strong movement in either direc- 
tion, is dangerous to oppose. Therefore be 
sure you understand the situation before 
you take the other side. 

14. When the market moves in your favor, 
after you have bought or sold under the 
directions given in this book, use System 
F cautiously, and you will make large 
profits at small risks, should the movement 
continue. 

15. Remember that Bull or Bear campaigns 
usually end with a movement in the minor 
stocks, while the leaders fluctuate but little. 
n6 



16. Keactions generally come after a three 
days' movement on large volumes. The 
movement is usually continued for a short 
time, on the fourth morning, before the re- 
action definitely begins. 

17. Quiet, weak markets usually indicate 
a decline, and quiet strong markets, a rally. 

18. When a market has continued for sev- 
eral days with only fractional changes, and 
small volumes, if it then declines for an 
entire day and closes at the bottom with a 
fair increase in volumes, it will generally 
advance the next day. But if such a market 
advances for an entire day and closes at the 
top, on fair volumes, it will usually drop 
the next day. 

19. When London's prices are above New 
York's closing, and Wall Street, at the open- 
ing, rallies prices above London, generally 
the market is a sale for a point or two. The 
reverse is also true. 

20. In a strong Bull or Bear market, it is 
wise to move with it, rather than to trade 
for reactions. 

21. Do not permit your trades to influ- 
ence your judgment, as they naturally will. 

22. Keep your trades and your opinions 

117 



to yourself. Otherwise your judgment will 
be warped by those with whom you talk. 

23. Always give your orders in writing, 
unless by telephone, and always make at the 
time, a memorandum of each order and 
trade. 

24. Avoid giving " discretionary " orders. 

25. If your order is " at the market," gen- 
erally limit the price by adding " not above 
(or below as the case may be), ." 

26. Orders, except Stop Loss, are good 
only for the day on which they are given, 
unless otherwise specified. If you want them 
executed after that, you must so state in 
your order. Thus " G* T. C." or "Open 
Order," indicates that the order is " Good 
till cancelled." You can also limit the order 
as good for a certain number of days or 
until a certain date. 

27. When in doubt, do nothing. 

©tbet Exchanges 

Speculation in Cotton 

Cotton is bought or sold by the bale, which 
contains, or is reckoned at, 500 pounds. The 
minimum amount traded in, is 100 bales. 
Each month's cotton is traded in by itself. 
n8 



In stock trading, a point is a dollar a 
share, and less fluctuation are indicated by 
fractions (eighths). 

In cotton, a point is one-hundredth of a 
cent a pound. Twenty-five points equals 
one- fourth of a cent on each pound traded 
in. Each point up or down, equals $5 on 
100 bales. 

If you buy 100 bales of cotton at twelve 
cents a pound, an advance of fifty points 
will give you a profit of $250, while if it 
advances to thirteen cents, your profits 
would be $500. 

There is one movement in cotton that is 
quite regular whether prices are high or 
low. 

Tear after year interest in futures is 
protected in the spring by buying May cot- 
ton, and selling July cotton as prices ad- 
vance. 

Thus in February, 1904, July cotton led 
the market advancing up to eighteen cents 
a pound. Then came a natural break, cotton 
dropped several cents a pound until it 
reached a price where users came into the 
market to buy it. 

Then it again advanced, and May cotton 

119 



was bought while July cotton was sold un- 
til May sold above any other month- 
There is always a fixed demand by users 
for cotton at such prices as they can afford 
to pay. When the market drops much be- 
low those prices, one may buy safely, and 
when it goes much above those prices, it 
is dangerous to buy it even if one does not 
venture to sell it. 

Cbe Cbicago JSoarfc of ftraDe 

New York is the center for stock and cot- 
ton trading, while Chicago is the center for 
trades in cereals, and the Chicago Board of 
Trade is the Cereal Exchange, the same as 
the Stoch Exchange in New York is the 
Board of Trade for stocks. 

It is usually thought that trading in 
cereals is simply betting on future prices. 
But, on the contrary, all cereals bought or 
sold on the Chicago Board of Trade, are 
supposed to be actually delivered, when the 
contract matures. 

The contract is an agreement made on the 
floor of the Board between members, to buy 
or to sell a certain amount of grain, seeds 
or provisions. Each contract matures on 
120 



the last day of the time limit named in it. 

In practice the Clearing House of the 
Board of Trade, enables brokers to avoid 
the trouble and expense of actual delivery 
of property. There, a deal between two 
members is adjusted by paying the differ- 
ence between the two prices. 

On unsettled contracts, however, the prop- 
erty itself must be delivered on the last day 
named in the contract. Failure to do this 
is punished by enforcing the payment of all 
losses that result from non-delivery. 

The methods of trading in cotton, grains, 
provisions and coffee, are similar to those 
used in stocks, and therefore need not be 
given in detail. 

(Sluanttts — d&argins — Commissi cms 

Members of either Exchange will gen- 
erally buy small quantities of anything dealt 
in on their Exchanges* for cash customers, 
but, as most trades are made on margins, 
the various Exchanges have written or un- 
written rules (covering quantity, commis- 
sions, etc.), to be observed by brokers. 

The New York Stoch Exchange brokers, 

121 



generally trade (on margins) in lots of 100 
shares and upwards, and require from three 
per cent, to ten per cent, margins. But a 
nominal 100 shares of certain stocks, like 
Penn. and Reading, are only actually fifty 
shares, since the par value of the stock in 
these Railroads is but $50, instead of the 
customary $100, while some stocks, like 
Anaconda Copper, have a par value of $25. 
So that an order to buy 100 shares of Ana- 
conda, would only mean the purchase of 
$2,500 worth at par, instead of $10,000 worth 
at par of other stocks. 

The Consolidated Stock Exchange brok- 
ers trade in ten share lots and over in stocks, 
and require margins of from two per cent. 
to ten per cent., depending on the customer, 
the stock and the market. 

The interest charged customers by brokers 
for carrying long stock, varies from four 
per cent, to six per cent., and when money is 
high, they also charge whatever commission 
they have to pay to get it. 

Stock Exchange members are not per- 
mitted by their rules, to charge customers 
less interest than they themselves pay, nor 
to share commissions with them. 

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In general the smallest quantities, lowest 
margins and least commissions on trades 
made by regular Houses on either Exchange, 
are shown in the above tables: 

From these tables you can easily compute 
your gross profits or losses on any trade. 
Then deduct the commissions and interest, 
and you will find your net profits. 

If you bought 200 shares of stock on the 
Consolidated Exchange, and it advanced 
five-eighths, your profits would be twenty 
times the amount shown in table No. 2, 
($6.25x20=$125.) Suppose your interest 
was $5.25 and your commission (four times 
the amount in table 'No. 1 as profit on 
ten shares, because you bought four 
times as much stock), $25, (total, $30.25) 
your net profits would be $125 — $30.25= 
$94.75. In the same way, your gross 
profits on 500 bales of cotton that advanced 
fifty one-hundredths (one-half cent) per 
pound, would be $1,250.00. Deduct the 
commission ($50) and you have $1,200 
profits, from which the interest must be sub- 
tracted. 

Remember that on short sales there are no 
interest charges. 

125 



Clearing Douse 
Zbc Stock JEjcbange Clearing Ibouse 

Until 1892, when the Clearing House was 
organized, actual delivery was made under 
the rules, of all stocks dealt in. 

Thus if your broker bought 500 Atchison 
from A. B., 200 from C. D., and 100 Paul 
from E. F., and sold 500 Atchison to Q. E., 
200 to S. T., and 100 Paul to U. V., he 
would receive the 800 shares from A. B., C. 
D., and E. F., and pay for them. Then he 
would deliver the 800 shares to Q. R, S. T., 
and TJ. V., and receive pay for them. When 
the trades covered thousands of shares this 
actual delivery caused a great deal of un- 
necessary work, which could be saved by a 
system of balances settled at some central 
agency. 

Now, members of the Clearing House 
save much of this work by the simple plan 
of balancing their trades, as shown below, at 
the trifling cost of two and one-half cents 
per hundred shares cleared, including bal- 
ances. 

The general plan, varied in details, is 
the same in all Clearing Houses. 
126 



Deliver (or Seller's Clearance) Ticket 

New York, April 3, igoj 
No. 1 

Clearing House of the New York 
Stock Exchange 

DELIVER TO - 

200 Shares Atchinson Com. % %68 
for account of the undersigned. 

Black &* White 



Receive (or Buyer's Clearance) Ticket 

New York, April 3, 1905 
No. 2 

Clearing House of the New York 
Stock Exchange 



RECEIVE FROM 

joo Shares Atchinson Com. @ %yo 
for account of the undersigned. 

Black &<> White 



127 



Within one hour and a quarter after the 
Exchange closes, each seller sends to the 
buyer his u deliver ticket/ 7 and each buyer 
sends to the seller his " receive ticket " 
showing that the trade is properly booked. 

The seller's clearance ticket is printed in 
red on white paper. The buyers clearance 
ticket is printed in black on yellow paper. 

Then each broker makes a Clearing House 
Sheet, showing the " receive " and the " de- 
liver " tickets of all his trades for the day, 
with the debit or credit balance, and sends 
it with the tickets, to the Clearing House 
within four hours after the Exchange closes. 

If the sheet shows a debit balance, the 
broker must attach to the sheet his check 
for the amount. If a credit balance is 
shown, he attaches a draft for the amount, 
on the Clearing House bank. 

Thus each broker's accounts are audited 
daily by others, and the Clearing House 
practically guarantees their correctness. 

The second Clearing House Sheet shows 
an account where the balance due Black and 
White is covered by a draft attached. 

The Clearing House Sheet for the above 
account would be as follows: 
128 



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130 



By sending this sheet to the Clearing 
House with his check for $1,600 attached, 
he neither receives nor delivers a share of 
stock that day, and instead of issuing three 
checks and receiving and depositing three 
more, he simply pays the balance shown, and 
the Clearing House does the rest. 

If stock is shown on either " deliver " or 
u receive " tickets, that is not on the other 
tickets, then there is left a balance of stock 
to be delivered or received. 

You will see that balancing these ac- 
counts includes more than simple cash bal- 
ances. These are settled by check or draf f , 
but if there is stock to be actually deliv- 
ered, any broker having that stock to de- 
liver, although he was not concerned in this 
deal, may be directed by the manager of the 
Clearing House, to deliver it to the broker 
whose sheet shows it is due to him. 

When this is done through the whole list, 
each broker has received the actual balance 
of shares due him, and the Clearing House 
books will balance correctly. 

The " delivery price " may not be the 
actual price at which the trade was made. 
It is an arbitrary price, usually the whole 

131 



number nearest the last sale of the stock 
named. 

This arbitrary " delivery price " is made 
for convenience to avoid fractions, and 
makes no difference in the accuracy of the 
result, since the " balance draft " or the 
" balance check " simply offsets the natural 
difference that comes from using an arbi- 
trary price in reckoning the value of stock 
balances. 

Zhe BeeoctateD Xanfcs 

This is the New York Bank Clearing 
House, which was established in 1853. 

It is a voluntary association of certain 
banks, and an officer of the United States 
Treasury. 

Its purpose is to find out and settle all 
balances between banks that are members of 
it. 

Each bank sends daily to the Clearing 
House a statement of its claims on each 
bank represented, and a summary of its ag- 
gregate claims on all the banks. It must 
also have tickets to deliver, showing its total 
claim on each bank. 

Each bank must have two clerks, a de- 
132 



livery and a settling clerk, at the Clearing 
House, at two minutes before ten a. m., so 
as not to delay the opening an instant. 

At exactly ten o'clock each delivery clerk 
hands to the settling clerk of the bank 
nearest to him, the package belonging to 
that bank, drops the corresponding ticket, 
showing the amount, into a box prepared 
for that purpose, and obtains on his 
schedule, the initials of this settling clerk. 
This operation continues until each bank 
has been served. 

Then each settling clerk sets down in a 
column all the amounts on his tickets, adds 
it, and sends the amount to the proof clerk, 
who arranges it so that the debit and the 
credit of each bank shall be on the same 
line. 

A glance thus shows how much each bank 
owes the Clearing House or the reverse. 
Then these debits or credits are read aloud, 
and each clerk jots down the amount due to 
or from his bank. Each bank must pay the 
Clearing House whatever it owes on this 
balance, before half -past one on the same 
day, and then the Clearing House pays the 
same money to its creditors. 

133 



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134 



As the New York Clearing House clears 
for the entire nation, its business must 
necessarily be enormous. In fact it is con- 
siderably over one hundred millions a day, 
and yet at night it is not supposed to have 
a dollar in its possession. 

In spite of the rapidity with which the 
work is done, and the enormous amounts 
handled, there are not many errors made by 
the clerks. To prevent delay and careless- 
ness, each clerk is fined for being late, and 
for each error. 

Clearing Ibouae Certificates 

Sometimes a great demand for currency, 
or a distrust of particular banks, will cause 
the withdrawal of their deposits and force 
them to suspend. 

When a few banks suspend and distrust 
of banks increases, excessive demands may 
be made on comparatively safe banks, which 
might compel them also to close. 

In such cases, it is both the duty and the 
policy of the strongest banks to help the 
others, and they sometimes have been 
obliged to " pool their reserves " to do this 
successfully. 

135 



To meet these crises " Clearing House 
Certificates" were issued in 1860, 1873, 
1884, 1890, and 1893. Any member-bank 
could deposit with the New York Clearing 
House its bills receivable or other securi- 
ties, together with its own obligation, and 
receive in exchange, certificates for sev- 
enty-five per cent, of the par value of the 
securities, which certificates were accepted 
in lieu of cash in the payment of Clearing 
House balances. 

To prevent the banks from using them too 
freely, they drew six per cent, interest from 
the date of issue. In 1893, certificates to 
the amount of $41,495,000 were issued, and 
saved the business of the country from a 
severe panic- While they did not increase 
the actual currency of the country, they 
established confidence, and decreased the 
demand for bills and coin, until the times 
became better, when they were withdrawn. 

Qbtafning Xoana 

The influence that banks can, and often 
do exert over speculation is understood 
when their relations to the brokers are 
made plain. 
136 



The broker carries stock for his customer 
on a small margin of from five to ten per 
cent. He has, however, actually to buy the 
security and pay for it. He must, there- 
fore, get most of the balance which he pays, 
somewhere. He usually hires it from a 
bank, or trust company, depositing as se- 
curity, stocks or bonds he has on hand, 
which he has bought for customers. 

Legally this stock belongs, not to the 
broker, but to the customers, since he has 
bought it for them, has charged it to them, 
and has credited on this purchase the mar- 
gin received. 

The broker, therefore, has no legal right 
to use this stock as collateral for a loan, un- 
less the customer agrees to permit him to do 
so. But custom tacitly sanctions this tech- 
nical violation of law, and necessity compels 
it. 

Now if the broker has bought for a cus- 
tomer stock costing $100,000, he can get 
from the bank usually about $80,000 loan on 
this stock. That leaves $20,000 to be ob- 
tained elsewhere. If the customer puts up 
one-half of it, the broker must supply the 
other half. 

137 

10 



Sometimes the banks will not loan nearly 
eighty per cent, of the value of the security, 
and sometimes actually refuse to loan on 
certain stocks. This may cause a semi- 
panic in such stocks as are discriminated 
against. 

But the broker must pay for the stock 
when he gets it, and he must get it, before 
he can put it in a bank for a loan. What 
can he do if his bank balance is not enough 
to pay for the stock ? 

With an understanding that the security 
shall be delivered to the bank as soon as 
the broker gets it, the bank certifies a check 
for the amount to be paid, when the broker 
really has but a small part of the amount. 

The National banking law expressly make 
such over-certification unlawful, but no no- 
tice is taken of this law, since, in effect, the 
act is only a temporary loan made under 
an agreement between the banker and the 
broker, that if the broker will keep with the 
banker a certain daily balance, the banker 
will certify checks to a fixed amount several 
times more than the daily balance. 

If he does not deposit securities against 
this loan, he must deposit enough money to 
138 



keep his daily balance at the sum named 
besides making up the amount over-certi- 
fied. 

Some banks avoid a technical violation of 
the law by taking the broker's note for the 
amount, but the results and risks are the 
same in either case. These certified checks 
sometimes amount to from $80,000,000 to 
$100,000,000 in a single day. 

A call loan must be paid on demand, but 
custom generally makes it subject to call on 
the next day. No loans are called after 1 
p. m., and when called before that hour, the 
broker has until two p. M., to pay the 
amount due. 

When a loan is obtained on deposit of 
securities, no note is given, but the broker 
simply puts in a " loan envelope " the se- 
curities pledged, and hands it to the bank. 
On the outside of the envelope is the broker's 
name and a list of the securities with their 
values. 

The bank puts this envelope into a larger 
one on which is marked a list of the se- 
curities, the amount and character of the 
loan, date, etc. 

The borrower usually signs a contract by 

139 



which the bank may sell the securities 
pledged, in case any indebtedness of the 
broker to the bank is not properly paid. 

JBanfc Statement 

The condition of the money market is sup- 
posed to be reflected in the Bank Statement 
which is issued by the Clearing House on 
Saturday of each week (unless it is a holi- 
day), about half -past eleven. 

This shows the average condition for the 
week of loans, deposits, cash on hand, cir- 
culation and surplus reserve of all banks 
that are members of the Clearing House. 

By the Clearing House Rule, all bank- 
members must keep on hand specie and 
legal tender to at least twenty-five per cent, 
of their deposits, and this amount may be 
changed as the Clearing House Committee 
may determine. 

When the surplus reserve is diminished 
considerably, money is liable to become 
scarce, while if there is a large and increas- 
ing surplus reserve, money should be easy, 
if other things are equal. 

A very large surplus sometimes shows so 
small a demand for money as to indicate 
140 



little or no business, while a deficit in the 
surplus reserves, is, at least, a dangerous 
sign and indicates financial trouble. 

Loans also serve as a guide and a warn- 
ing to speculators. When they are con- 
tracted, interest advances, loans are called, 
and stocks are often thrown on the market 
because brokers cannot carry them. 

Over- expansion of loans often produces 
speculation, inflation and financial crises. 
It increases deposits which demand a larger 
reserve. 

The cash holdings of a bank statement 
show the actual amount of specie and legal 
tender on hand and are quite a different 
matter from the deposits, which include all 
the credits as well as cash holdings. The 
larger the loans, the greater the deposits. 

An increase in cash holdings gives the 
banks so much more money to loan, while 
a decrease, compels a reduction of loans. 

The money market is often so manipu- 
lated that the Bank Statement does not al- 
ways reflect the true condition of the banks, 
and one must therefore take this into ac- 
count in estimating the influence of the 
Bank Statement on the market. 

141 



foreign Excbange 
dfcone£ anfc Ms Tllses 

When the world was young, barter took 
the place of any medium of exchange, but 
in time, it became necessary to have some 
common measure of value, and the precious 
metals, as varying less in intrinsic value 
than most other things, became such a 
measure. 

Then, as trade between nations increased, 
the balance due any country had to be paid 
in gold or silver. 

But the difficulty in transporting it safely, 
the loss of interest, and the cost of trans- 
portation, made it necessary to have some 
easier way of settling the balance of trade, 
and Foreign Bills of Exchange gradually 
gained favor more than five centuries ago, 
and have continued in use until the present 
time. 

JBtll of 3E£cbati0e 

A Bill of Exchange is simply an order to 
pay a certain amount to a party named in 
the bill, at a set time. To justify giving 
142 



such a bill, the drawee (or party on whom 
it is drawn), is supposed to owe the drawer 
(the party making the draft), at least the 
amount of the bill. 

While a Bill of Exchange is usually made 
payable to a certain person, it is negotiable, 
and passes by endorsement to a new holder. 

One merchant here sells to an English 
buyer a thousand dollars' worth of cotton. 
He can then draw a bill for that amount. 
Another merchant buys from a London 
house a thousand dollars' worth of woolen 
goods. The London seller can draw a bill 
on the buyer for that amount. 

Xow if these trades were kept separate, 
one American might receive a thousand 
dollars in gold from London, and the other 
American might send the same gold back 
by the next steamer. 

To remedy this round-about way of doing 
business, a sort of Clearing House for Bills 
of Exchange became necessary, and was pro- 
vided by certain merchants, who dealt in 
these Bills of Exchange, buying them from 
one class and selling them to another. 

u Supply and demand " fixes the premium 
on such Bills of Exchange. Thus if Eng- 

143 






land owes us on purchases, much more than 
we owe her, sterling Bills of Exchange on 
England would be sold at less than par, 
while if the trade balance was in her favor, 
these bills would command a premium. 

The limit of premium or discount would 
be the cost of sending the specie from one 
country to another, including insurance and 
interest. 

It is strange that no one has proposed a 
scheme for International currency that 
would abolish the costly and cumbersome 
Bill of Exchange, or the more troublesome 
specie transfer. 

Some ttnlcs anD Peculations 

The Exchange rules are very explicit and 
cover trading on the floor, commissions, 
time and manner of delivering securities 
sold, and tend to restrain members from un- 
fair competition, and to protect cus- 
tomers. 

Thus to prevent fictitious attempts to bid 
up or sell down stocks on the Floor of the 
Exchange, no members can safely pretend 
to buy or sell stock. All offers to trade 
must name the specific number of shares, 
144 



the par value of which must not be less than 
$500. No member is allowed to offer to buy 
or sell any security at a less variation than 
one-eighth of one per cent. On the Stock 
Exchange, members cannot charge cus- 
tomers less than one-eighth of one per cent, 
for buying or selling, and on the Consoli- 
dated, not less than one-eighth of one per 
cent, on less than fifty shares, but, over that 
amount, may charge only one-sixteenth of 
one per cent, each way. Such commissions 
must always be charged on the par value of 
the security, without regard to its market 
price. No bonus, commission, or percentage 
can be paid or allowed to any one for busi- 
ness brought to members. 

Good and Bad Deliveries are clearly set 
forth in the following 

IRules for B)eltY>et£ of Stocfts an& 

Bon&s, flew l£orft Stocft 

Excbange 

Stocks 

The signature to the assignment upon a 
certificate of stock must be technically cor- 
rect, L e., it must correspond with the name 

145 



as written upon the face of the certificate 
in every particular, without alteration or 
enlargement, or any change whatever. 
" Mr.," " Messrs." or " Esq.," however, need 
not be prefixed or affixed to signatures. 

" Brothers " must be endorsed exactly as 
drawn, not " Bros." and vice versa. All pre- 
fixes and affixes, such as " Judge," " Major," 
" Hon.," " Bight Hon.," " Doctor," " M. D.," 
"D. D.," "Bev.," "LL. D.," etc., must ap- 
pear in the endorsement. 

"And" may be written " &," and vice 
versa. 

" Company " may be written " Co.," and 
vice versa. 

Certificates in the name of a MABBIED 
woman are not a good delivery while the 
transfer hooks are open; when the transfer 
books are closed a joint execution of the 
assignment, by the husband and wife and 
a joint acknowledgement before a Notary 
Public will make the certificate a delivery 
only during closing of transfer books. 

The following form should be used : 

State of ) 

County of. f 

On this .day of 19. . ., be- 

146 



fore me came and her hus- 
band, both of them to me known, and they 
severally acknowledged that they executed 
the foregoing Assignment and Power of At- 
torney, for the purpose therein mentioned. 
(seal) 

Certificates in the name of an UNMAR- 
RIED woman or a WIDOW are a good de- 
livery when the following form of acknowl- 
edgment is executed upon the back of the 
Certificate : 

State of ) 

County of \ ss ' 

On this day of 19. . ., be- 
fore me personally came to me 

known and known to me to be an unmar- 
ried woman (or widow) and known to me to 
be the same person named in the within 
certificate of stock and described in and 
who executed the foregoing Assignment and 
Power of Attorney, and acknowledged to 
me that she executed the same for the pur- 
poses named. 
(seal) 

The foregoing ride does not ohtain when 
the prefix "Miss" appears upon the face 
and reverse of a Certificate. 

147 



Powers of Attorney or of substitution or 
assignments, signed by Trustees, Guardians, 
Infants, Executors, Administrators, Agents 
or Attorneys, are not a good delivery. 

When Transfer books are closed by any 
legal impediment, so as to render their be- 
ing open again uncertain, Powers of Attor- 
ney must be acknowledged before a Notary 
Public, with seal and date. 

An endorsement by a member of the Ex- 
change, or a firm represented on the Ex- 
change, on a Certificate, is considered a 
guarantee of the correctness of the signa- 
ture of the party in whose name the Stock 
stands. In all cases where Powers of Sub- 
stitution are used, the original Assignment 
and Power of Attorney, and each Power of 
Substitution, must be guaranteed by a mem- 
ber or a firm represented in the Exchange, 
resident or doing business in New York. 

A detached Power of Attorney, or of sub- 
stitution, must contain a full description of 
the Stock or Bond by name of Company, 
and number of certificate, and must be ac- 
knowledged or proved before a Notary Pub- 
lic, with seal and date. A separate power 
148 



and acknowledgment must accompany each 
certificate, as per form following: 
Irrevocable Stock Power. 

fmow HII ZlDen bs TLbcsc presents 

That 

for Value Received, have bargained, sold, 
assigned and transferred, and by these pres- 
ents do bargain, sell, assign and transfer 
unto 

Shares of the STOCK of the 



standing in name on the books of 

the said 

And do hereby constitute and ap- 
point 

true and lawful attorney, IRRE VO- 

CARLY, for and in name 

and stead, but to use, to sell, as- 
sign, transfer and make over all or any part 
of the said stock, and for that purpose to 
make and execute all necessary acts of as- 
signment and transfer thereof, and to sub- 

149 



stitute one or more persons with like full 
power, hereby ratifying and confirming all 
that said Attorney or sub- 
stitute or substitutes shall lawfully do by 
virtue hereof. 

In Witness Whereof, . . .have here- 
unto set hand and seal at 

the day of 190 

Witness (l.s.) 

{Notary's acknowledgment and seal.) 

State of ) 

County of j ss 

On this day of one thou- 
sand nine hundred and before me 

personally came 

to me known, and known 

to me to be the same person described in 
and who executed the foregoing Assignment 
and Power of Attorney, and acknowledged 
that he executed the same for the purpose 
named. 

In Testimony Whereof, I have hereunto 
subscribed my name, and affixed my seal of 
office, the day and year last above written. 
Notary Public. 

Certificates in the name of an institution, 
or in a name with title affixed, as Cashier, 
150 



President, or other official designation, are 
not a good delivery unless assignment is ac- 
knowledged before a Notary, with seal and 
date, who must certify that he knows the 
person signing, and knows him to be the 
person authorized, and that he has seen the 
minutes of the institution, authorizing said 
person to make the Assignment. Some 
Companies require, in addition, a certified 
copy of the resolutions of the Directors of 
the Company in whose name the Stock 
stands, authorizing the assignment, such as 
the Western Union Telegraph, the Com- 
panies having their Transfer Agencies at 
Grand Central Station and American 
Sugar Refining Company, etc. 

The several Companies having Transfer 
Offices at Grand Central Station, Forty- 
second Street, require the Power on a Cer- 
tificate, in the name of a Foreign Resident, 
to be acknowledged before a United States 
Consul, or before J. S. Morgan & Co., Lon- 
don. 

A Certificate for more than 100 shares is 
not a good delivery. Certificates for less 
than 100 shares are a good delivery in lots of 
100 shares. The receiver may in all cases 

i5i 



require delivery by Transfer, provided there 
be ample time to make it and the transfer 
books are open. 

When a claim is made for a dividend on 
Stock after the transfer books have been 
closed, the party in whose name the Stock 
stands may require from the claimant pres- 
entation of the Certificate, and a written 
statement that he was the holder of the 
Stock at the time of the closing of the books, 
and also a guarantee against any future de- 
mand for the same. 

JBonfcs 

Coupon Bonds issued to bearer, having an 
endorsement upon them not properly per- 
taining to them as Security, must be sold 
specifically as " Endorsed Bonds " and will 
not be regarded as a good delivery under a 
sale not so qualified. 

Bonds with a stamp or endorsement stat- 
ing that they have been deposited with 
States as security for Bank circulation or 
Insurance must be released and acknowl- 
edged before a Notary, and then are a good 
delivery only as " Endorsed Bonds." 

If a definite name, such as John Jones, 
152 



John Brown, Chemical Bank, Denver 
Company, appears upon a Bond, it is re- 
garded as implying ownership which must 
be released, with acknowledgment before a 
Notary. The Bond is then a good delivery 
only as an " Endorsed Bond." Bonds with 
assignments or releases executed by Trus- 
tees, Guardians, Infants, Executors, Ad- 
ministrators, Agents, or Attorneys, are not 
a good delivery as " Endorsed. Bonds." 

Coupon Bonds. — Delivery must be of the 
denomination of $1,000 or $500. Large 
Bonds (over $1,000) or Small Bonds (under 
$500) good only in special transaction. 

Registered Bonds. — Deliveries must be in 
certificates not exceeding $10,000. 

Coupons on a Bond must be those which 
properly belong to it, of the corresponding 
number. In case of absence of any Coupon, 
its full face amount in money is a good sub- 
stitute, unless special notice is given to the 
contrary ; provided, however, that in case of 
absence of a past due Coupon from a Bond 
of which any of the past due Coupons have 
been paid with interest, its full face value 
in money, with interest thereon to date of 
delivery, is only a good substitute. 

153 
11 



Coupon Bonds which can be registered in 
a name or to Bearer, and which have been 
registered in a name, must be registered to 
Bearer to be a delivery. When transfer 
books are closed, if registered in a name, a 
Power of Attorney, acknowledged before a 
Notary, in name of, witnessed or guaranteed 
by a member, must accompany each Bond. 

Government JBonDs CRegfstereD) 

The execution and acknowledgment of IT. 
S. Registered Bonds, when not made at the 
Treasury Department, must be before a IT. 
S. Judge, 13". S. District Attorney, Clerk of 
a IT. S. Court, Collector of Customs, Col- 
lector or Assessor of Internal Revenue, IT. S. 
Treasurer or Assistant Treasurer, or the 
President or Cashier of a National Bank, 
or, if in a foreign country, before a IT. S. 
Minister or Consul. In all cases the officer 
must add his official designation, residence 
and seal, if he has one. 

When the assignment is made by a Cor- 
poration it must be named as the assignor; 
when by a Guardian, Trustee, Executor, Ad- 
ministrator, an Officer of a Corporation, or 
any one in a representative Capacity, proof 
154 



of his authority to act must be produced to 
the officer before whom the assignment is 
made and must accompany the bond. 

XTbe tflital (Question 

44 Can U d&afce dfcones in Mall Street " 

Everybody is asking this question, which 
is quite different from " Will I make 
money in Wall Street if I begin to specu- 
late?" 

Frankly, you probably will follow the long 
procession of lambs, which is constantly 
going home shorn of all superfluous fleece, 
and sometimes partially skinned. 

This has been the experience of four-fifths 
of the outside speculators during the last 
quarter, of a century since I became familiar 
with Wall Street Methods. 

You can never know the anxiety, wretch- 
edness, misery, ruin and even deaths, that 
have resulted from rash speculation in Wall 
Street. 

It is so easy to build "air castles," that are 
pyramided up to the skies in imagination, 
and founded on a constant movement of our 

155 



favorite stock, — that " fools rush, in where 
angels fear to tread/' and, without knowl- 
edge, experience, or proper guidance, trade 
in a haphazard way, depending on luck and 
tips for success. 

Such a course will naturally fail in any 
pursuit. It can but fail sadly in Wall 
Street, where you must contend with the 
shrewdest, cunningest and most unscrupu- 
lous manipulators in the world. 

You cannot hope to beat them at their 
own game. You can only expect to under- 
stand their methods, to foresee their plans 
and to move parallel with their movements. 

If you will study to do this, it is quite 
possible, and even probable, that you can 
make money in Wall Street, and the object 
and purpose of this book is to keep you 
from losses and to guide you in your trades 
successfully. 

If, therefore, you desire to stand a fair 
chance in the Wall Streeet Game, you must 
study this work as closely as an Astronomer 
reads the movements of the stars. You 
must master its teachings, understand its 
methods, and use good judgment and com- 
156 



mon sense in your trades. How otherwise 
can you hope for success? 

Could you take the wheel of a vessel and 
guide it through Hell Gate ? Could you lay 
out its course over the trackless ocean to 
another shore? Could you even make the 
common things of trade, a hat, a shoe, a 
shirt ? 

No, no. Your ship would run on the 
rocks, or sink beneath the waves, and your 
hat, shoe or shirt would be ruined and 
valueless. 

How then can you expect safely to en- 
counter the tides that carry stocks up or 
down, to overcome the hurricanes of panics 
and booms that destroy so many, or to avoid 
the Scylla and Charybdis of the manipu- 
lators, each of whom, like the terrible god- 
dess, has " twelve feet and six long necks 
with terrific heads, and three rows of huge 
teeth within each," and who stretch out 
these necks to catch the prey, and who, more 
grasping than Scylla, are not satisfied with 
one man from each ship that sails near 
them. 

Take warning in time from the fate of 
others, and never take a risk in Wall Street 

157 



until you have prepared yourself by every 
means in your power to gain some small 
measure of success. And even then, begin as 
cautiously and conservatively as we have 
urged you to, in this book, and risk no money 
in margins, that you cannot afford to lose. 

Remember that success is nearly as dan- 
gerous as failure. A few fortunate trades 
will tend to give you too much courage to 
take undue risks. They should, on the 
contrary, make you doubly cautious in 
your ventures. 

Let confidence come to you only with 
knowledge. Then if, relying on the wis- 
dom and experience you have gained from 
studying this work and from using the 
principles therein laid down, you find that 
you have at the end of a year a balance in 
your favor, you may act with greater con- 
fidence in your own ability to speculate 
successfully, and may look forward with 
considerable assurance, to a constantly in- 
creasing income. 

With these words of advice and warning, 
this book is placed in your hands, with the 
hope that you will use it wisely for your 
best good. 
158 



WALL STREET IDIOMS 



Accommodation Paper. — A paper (note) 
which represents no real indebtedness, to be 
used to raise money, or as security. 

Arbitrage House. — A house that deals in 
stocks which have different values in several 
markets at the same time. 

Averaging. — Increasing an investment when 
the market goes against you, so as to make 
your total investment average less than your 
first one. 

Bale. — A bundle of goods made up for stor- 
age or easy handling. A " bale of Cotton " 
means 500 pounds. 

Bank Clearings. — The aggregate amount of 
checks and drafts exchanged between members 
of a Clearing House. 

Barrel. — A barrel of pork means 200 pounds, 
although it contains only 190 pounds. A barrel 
of flour holds 196 pounds, of cured fish, 200 
pounds. A barrel of liquids varies from forty 
to fifty gallons. 

Bear. — One who favors lower prices. 

159 



Big Four.— The C. C. C. & St. L. railroad. 

Bill of Exchange. — A draft on a person or 
bank in another place, for money in lieu of 
the same amount deposited with the drawer, 
or due from him. 

Block. — A considerable number of shares or 
bonds traded on as a lump. 

Break. — A quick, small drop. 

Bucket Shop. — A broker who neither buys 
nor sells stock, but simply bets with customers 
on the market. 

Bulge. — A sharp, small rally. 

Bull. — One who favors higher prices. 

Buyer, 30. — The buyer may demand his pur- 
chase within thirty days. 

Buy in. — Purchase of property to fill a short 
sale, or to return borrowed certificates. 

Buying on a Scale. — Buying more stock at 
regular changes in price. 

Call. — A privilege to buy a certain number of 
shares, at a fixed price, in a limited time. 

Call Loans. — Money loaned to be returned 
the day it is asked for, before the close of 
banking hours. 

Carrying Stock. — Holding it for an advance. 

Clearing House. — An organization established 
in 1892 to settle balances between members. 
160 



Cliques. — A combination to manipulate a 
deal. 

Clover Leaf.— The Tol. St. L. and W. 

Coalers. — Railroads, that, being miners and 
carriers, largely depend on the coal trade for 
profits, viz: Reading, D. L. & W., D. & H., 
Jersey Central, and Lehigh Valley. 

Commissions. — Charges made for services 
rendered for buying, selling, obtaining, or 
handling property. 

Common Stock. — The ordinary or least valu- 
able stock in a corporation. 

Consols. — Great Britain's bonded debt. 

Convertible Bonds. — Bonds that can be ex- 
changed at certain times under certain condi- ■ 
tions for stock. 

Corner. — A manipulated scarcity of any stock 
which has been oversold short. 

Cotton Future. — An option on delivery of 
cotton in a future month, at a premium or dis- 
count. 

Cotton Contract.— X. Y. Contract is for 50,000 
pounds (gross) of U. S. cotton delivered at a 
fixed time, with five days notice, at seller's 
option from a Xew York licensed warehouse. 
The cotton must be classified and weighed by 
the Inspect or-in- Chief of Cotton of the X. Y. 

161 



Cotton Exchange. This is not required under 
New Orleans Contract. 

Coupon. — A printed slip attached to Coupon 
Bonds, showing amount of interest due on cer- 
tain dates. 

Covering Shorts. — Buying in to deliver stocks 
previously sold short. 

Cross Trades. — A broker cannot fill a cus- 
tomer's orders from his own stock, or buy from 
a customer for his own account. But may sell 
for one customer and buy for another the same 
stock at the same price, using another broker 
to make the nominal trade. This is Cross 
Trading. 

Current Assets. — (a) Cash on hand and on 
deposit; (b) loans and bills receivable; (c) ac- 
counts receivable; (d) due from other corpora- 
tions and persons; (e) due from agents and 
officers; (f) advances to other corporations or 
persons; (g) sundry assets. 

Current Liabilities. — (a) Loans and bills pay- 
able; (b) accounts payable; (c) pay rolls and 
vouchers; (d) interest and dividends accrued; 
(e) traffic balances due others; (f) sundry lia- 
bilities. 

Debenture Bond. — Bond resting on no specific 
security. Really a note in bond form. 
162 



Delivery. — Stock or property offered to the 
buyer according to Exchange rules, is a "good 
delivery." If not so offered, the delivery is 
bad. 

Dividends. — A share of profits paid to in- 
vestors, or of assets paid to creditors. 

Drop. — A decline in values. 

Flat. — Without interest or premium. 

Flyer. — A quick trade for small profit. 

Frozen Out. — An irregular deal through which 
holders are forced to lose their interest in 
property. 

Futures. — (See Options). 

Gilt-Edge. — Any paper or stock that is un- 
doubted. 

Goulds. — The Properties supposed to be con- 
trolled by the Goulds, viz. M. 0. P., St. L, & 
S. W., Tex. Pac, D. & R. G„ R. G. & W, Wab., 
W. & L. E. 3 Ann Arbor, Western Maryland, W. 
Va. Cent., and W. U. Telegraph. 

Grangers. — Roads that depend largely on 
crop transportation for business, viz: C. & X. 
W.. Ch. M. & St. P., R. I., and in general the 
principal lines West. 

Gunning. — A concerted attack to break a 
stock either to reach Stop Orders, or to force 
certain holders to sell. 

163 



Harriman Group.— U. P., S. P., 111. Cent., C. 
& A. 

Hedge. — A change of trading to protect a 
previous trade from too great loss. 

Industrials. — Sugar, U. S. Steel, Standard Oil, 
Tobacco, Leather, Rubber and in general shares 
of manufacturing companies. 

Liquidation. — The selling of long stock, 
whether carried on Margins or actually owned. 

Listed and Unlisted Securities. — Those that 
are or are not registered for members of the 
Exchange to trade in. The first railroad stock 
— the Mohawk and Hudson — was listed in 1830. 

Long. — One who holds property for an ad- 
vance. 

Margin. — Value deposited to protect con- 
tracts. 

Monon. — The Ch. Ind. & Louisville railroad. 

Morgan Group. — Rdg., Jer. Cent., Lehigh Val- 
ley. S. P., and L. & N. 

Morgan-Hill Group.— X. P., G. N., C. B. & Q., 
(Northern Securities) Erie, Ch. I. & L. 

Net. — Clear of all charges, losses or deduc- 
tions. 

Nickel Plate.— The N. Y. Ch. and St. L. rail- 
road. 

On Call. — Money loaned to be returned be- 
164 



fore the end of banking hours, on the day it is 
demanded. 

Option. — Property bought or sold subject to 
the demand of the holder of the option. 

Outsider. — Xot a regular trader. 

Pan Handle.— The P. C. C. & St. L. railroad. 

Par. — The equality of nominal and face 
values. 

Pegged. — Held to prevent movement in a cer- 
tain direction. 

Pennsylvania Group. — The Pa. R. P.. Pa. Co., 
P. C. C. & St. L,. Pitts. H. W. & Ch., Cleveland 
& Pitts.. W. X. Y. & Pa., L. L. N. & W. 3 B. 
0.. and Che?. & 0. 

Pig. — A mass of metal as extracted from ore, 
weighing from 50 to 250 pounds. 

Point. — (a) In stocks $1 a share; (b) in cot- 
ton one-hundredth of a cent a pound: (c) in 
grain one cent a bushel; I'd) a tip to buy or 
sell. 

Preferred Stock. — Shares that have prefer- 
ence in claims over common stock, but come 
after bonded indebtedness. Preferred Stock 
usually has a certain dividend before the com- 
mon can have any. Some Preferred Stocks 
have an accumulated dividend. That is. if all 
the dividend is not paid each vear. all bal- 

165 



ances must be paid before any dividends can 
be paid on the common. 

Privileges. — Puts, Calls, Straddles and 
Spreads. 

Puts. — A Put is an option of selling certain 
property at a given price within a limited time, 
to the maker of the Put. 

Regular Stocks. — Stock sold to be delivered 
and paid for under Exchange rules. 

Scalper. — One who takes small profits. 

Seat. — A membership in an Exchange. At 
first each Board member had his own seat. 

Seller, the Year. — The seller can deliver the 
property bought, at any time within a year. 

Short. — One who sells for a decline. 

Short Sales. — Property sold for a decline. 

Speculation. — Buying or selling property for 
a profit, without coming into actual possession, 
instead of for an investment. 

Split. — A trade at a smaller fraction than 
the ordinary price quotations. 

Spread. — A Put and a Call combined, in one 
Privilege. 

Squeezed. — Shorts who can not borrow or 
buy stocks and who have to settle at artificially 
high prices. 

Stop Loss Order. — An order for a broker to 
166 



close a trade on a certain movement, or at a 
fixed price. 

Straddle. — Going long on one option and 
short of another. 

Tailer. — A follower of a clique, or pool. 

Ticker. — The Stock Indicator used to show 
trades on the Exchange. It was first used in 
1867. 

Tierce. — A cask of lard containing 340 
pounds. 

Tractions. — The leading street railroads like 
Man., Met., B. R. J., etc. 

Transcontinental— U. P., S. P., Atch., N. P., 
Great Xorthern. • 

Trunk Lines.— Pa., N. Y. C., Erie, B. 0., D. 
L. & W., etc. 

Trust. — A combination formed to regulate 
the supply and price of certain lines of 
trade. 

Under the Rules. — If a Stock Exchange 
member fails to meet calls for margins under 
the rules, the chairman sells or buys under the 
rules such securities as the member is delin- 
quent on, and the member is charged with the 
difference in price obtained and that agreed 
on. 

Underwriting. — One or more bankers agree 

167 



to take a certain amount of stocks or bonds 
at a given price. Subscription books are opened 
to sell to the public at a higher price. On all 
securities thus sold, the underwriters make the 
difference in price. All unsold securities are 
taken and paid for at the agreed price by the 
underwriters. 

Upset Price. — The lowest price at which 
property can be sold. 

Vanderbilts. — Those railroads supposed to be 
controlled by the Vanderbilts, viz: N. Y. Cen- 
tral, St. Paul, Mich. Central, Lake Shore, 0. 
& W., Ches. & 0., Canada Southern, Mckel 
Plate, P>. & A., C. C. C. & St. L., N. Y. C. & 
St. L., L. E. & W., Ch. & K W., Pitts. & L. E., 
and West Shore. 

Visible Supply. — The amount of any article 
of merchandise available for immediate 
use. 

Wash Sales. — Trades made on the floor of the 
Exchange with an understanding that they will 
not be carried out. 

Watered Stock. — Stocks issued in excess of 
assets. 

Whipsawed. — Losing whether stocks advance 
or decline. Buying at the top and selling at 
the bottom or vice versa. 
168 



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179 



TOflall Street ^Financiers 

In order to be permanently prominent 
in Wall Street, one must be more than a 
mere speculator, promoter, or banker. He 
must be a financier in the true sense of 
the word, ready to know and to seize the 
golden opportunities offered by the chang- 
ing" times, and to master them. 

Then the golden touch of Midas will be 
his, the masses will follow his lead, hang 
on his words and help to increase his suc- 
cesses. 

The enormous natural resources of this 
country have offered the greatest opportuni- 
ties for the development and improvement 
of transportation and manufactures, and 
the foremost leaders of Wall Street have 
been those who have foreseen future growth 
and greatness, and even when all things 
seemed to portend evil, have assumed the 
burden of reorganizing, combining, develop- 
ing and improving properties of intrinsic 
value, and have so handled them as to bring 
success out of failure, and profit out of loss. 

Some of these leaders have amassed fabu- 
lous fortunes, supposed to run up into hun- 
180 



dreds of millions, and, at least, greater than 
our imagination can picture. 

In every profession or business, it is the 
optimist who gains great and lasting suc- 
cess. Values added by improvements, de- 
velopments, and combinations are real 
values, from which depression can only 
temporarily detract. 

The men who have gained and retained 
great power and wealth in Wall Street, have 
been those who believed in a bright future, 
and who helped to make the sun of success 
shine on the Nation. 

Zbe THanfcerbtlta 

The Yanderbilt family control several 
railroads § called " The Vanderbilts." The 
man who founded the family and their 
fortunes, was Cornelius, known as Commo- 
dore, Yanderbilt. 

Beginning his business career as owner 
of a little row boat, by his genius and en- 
ergy he soon controlled a large fleet of 
ferryboats and steamers, doing an immense 
business. 

He then foresaw the more profitable field 
of operations in railroad development, and 

181 



secured 1 control of the Harlem Railroad. 
The Xew York aldermen granted him a 
franchise for a road up Broadway. The 
stock was put on the market and at once 
rapidly advanced. The aldermen and their 
friends sold several hundred thousand 
shares short, and then repealed the fran- 
chise. The Commodore knew what was 
going on, and quietly but rapidly advanced 
the prices nearly double. The Aldermen 
and their friends were caught in a trap and 
lost millions which went into the Commo- 
dore's treasury. 

In the same way he met the tricks of the 
Legislature and, as he said, "Busted the 
whole Legislature and made them go home 
without even paying their board bills-" 

It took five or six millions to do this, but 
he cornered the stock and could have put 
it where he pleased ; but finally settled with 
the shorts at $285 a share, for stock that 
sold at first at about $3 a share. 

His son, William H. Vanderbilt, in- 
herited his father's ability and energy, and 
was associated with the Commodore in build- 
ing up the Staten Island Railroad, the Har- 
lem Road and the Hudson River Railroad. 
182 



He, however, had more taste for develop- 
ment and improvement than for speculation, 
and was so successful that, at his death, he 
left about $200,000,000 to his heirs. 

His children were in full sympathy with 
their father and have carried out his plans, 
or have so changed them to suit the chang- 
ing times, that the so-called Vanderbilt 
system now includes seven large railroads 
together with many minor properties. 

The public confidence in the honest and 
able management of this system by the 
family, has always made the stocks stand 
well with those who look for safe invest- 
ments rather than for speculative profits. 

Gbe GoulDs 

Another family that have grown into 
sufficient prominence to give their name 
to a system of railroads stretching far and 
wide over the country, is that founded by 
Jay Gould. 

This remarkable man began his business 
career under most adverse circumstances. 
His idea from the first was to manage his 
own business. He studied surveying, made 
maps of a county, wrote its history, pub- 

183 



listed the book and sold it personally to 
the people. 

He soon accumulated a few thousand 
dollars and came to New York, where he 
married the daughter of a wealthy mer- 
chant. His father-in-law was interested in 
a railroad that was in a bad way. Gould 
bought his stock, and gained control of the 
road, which he proved to be valuable, and 
which he sold at considerable advance. 

This experience gave him the key to his 
future success. After a few more specula- 
tive investments, he gained control of the 
great Erie System, which gave him a solid 
foundation, and enabled him to acquire 
substantial interests in such systems as the 
Missouri Pacific, the Wabash and others, 
as well as in the most important telegraph 
line (the Western Union) in this country, 
and in the Manhattan Elevated of New 
York. 

His contest with Commodore Vanderbilt 
for possession of Erie, and with Cyrus W. 
Field for the Manhattan Elevated, are mat- 
ters of history- 

To what extent he might have carried 
his control of transportation is uncertain, 
184 



as his fertile brain and unceasing activity 
caused his death before his plans culmin- 
ated. 

Jay Gould left a remarkable family. At 
home he was a devoted husband and loving 
father, and his children cultivate and re- 
spect his memory. 

George J. Gould, his oldest son, had been 
placed in positions of trust and responsi- 
bility by his father, in order to fit him to 
take up the burden of management when it 
should fall to him. His wise control of the 
great properties left by his father, largely 
increased their value, until probably they 
are worth more than three times as much 
as they were when his father died. 

His knowledge of the details of the great 
lines he controlled was wonderful, and yet he 
seemed to carry them quietly and without 
uiudlue burdens. " The Goulds " include 
the great systems of the Missouri Pacific, 
Texas Pacific, the Wabash, and the South 
Western Pacific roads, together with the 
Western Union Telegraph Company, and 
a large interest in the Manhattan Elevated. 

3* pierpont Morgan 

Mr. Morgan comes of an old wealthy 

185 

13 



family, and' succeeded to the banking busi- 
ness of his father, with several millions 
capital. 

Naturally his standing was good at first, 
but he was not satisfied to simply rest on 
his father's reputation. 

He soon became master of his line of 
business and was the most successful organ- 
izer of railroads that this country has ever 
known. Road after road was placed in his 
hands, almost, if not quite bankrupt, and, 
by his skilful management, was put in good 
condition for its owners. 

He knew how to handle men as well as 
railroads, and, to a wonderful degree gained 
the confidence of bankers as well as invest- 
ors, so that his name, attached to a proposi- 
tion, ensured its success. 

His best known work was the organiza- 
tion of the United States Steel Corporation, 
which controls a large part of the iron 
ores and their products in the United 
States 1 . It was, no doubt, founded wisely 
and is destined to be one of the greatest 
Corporations in the world, although at 
times depressed by changes of business 
relatione- 
186 



Mr. Morgan's leading idea in these 
organizations, was to prevent ruinous com- 
petition, to secure economy of manage- 
ment, to produce the best results, and thus 
to serve the public at fair prices. 

He combined the great Northern, North- 
ern Pacific and Burlington Railroads by 
means of the Northern Securities Com- 
pany, which would undoubtedly have bene- 
fited the roads and the territory through 
which they run, through the real advantage 
of working in harmony with each other at 
a decreased cost. 

5obn 2). "Rockefeller 

The life of John D. Rockefeller reads 
like a fairy story. A poor boy without 
great advantages, but with the greatest 
talent for organizing and managing, 
seized the opportunity and became in a few 
years, the richest man in the world, with 
wealth so great and financial power so un- 
limited, that he was given credit whether 
deserving it or not, for nearly every promi- 
nent financial movement. 

Everything he undertook seemed to pour 
increasing riches on him and his associates. 

187 



He was best kmown by his control of the 
Standard Oil Company, but gradually ex- 
tended his sphere of influence until his 
power was felt in leading railroads like the 
New York Central, St. Paul, Missouri 
Pacific, Pennsylvania and others. 

For many years he was an invalid, but 
his mental energies seemed to have been 
strengthened by his physical weakness. 

He was not much known in public, being 
naturally of a retiring disposition, and was 
seldom seen at the meetings of the Boards 
of Directors of which he was a member. 

His gifts for public purposes were second 
only to Carnegie's. He was a prominent 
Baptist, and gave millions to their schools 
and colleges. 

His son, John D. Rockefeller, Jr., in- 
herited his father's ability and soon proved 
himself competent to manage his vast 
properties. 

It is a strange sight to see a young man, 
the possessor of millions and heir to un- 
known wealth, leading a Sunday School 
Class week after week and using his posi- 
tion and wealth for the benefit of young 
men. 
188 



James *R. fceene 

Jame9 R. Keene was born in England 
and came here when only seventeen. He 
became a lawyer in San Francisco, and 
gained valuable information in regard to 
mines from suits which he carried on. 

A few hundred dollars invested in min- 
ing stock, gave him a small fortune, and 
led him into speculation. He took the bear 
side of the market and his aggressive tactics 
soon made him famous as a leader, and 
gave him a few millions profit. 

When the panic of 1873 came on, lie 
began buying good securities, and, in 1880, 
had made many millions from his specula- 
tions. 

He engineered a corner in wheat, but 
was not properly supported by his associ- 
ates. The corner broke and his brokers sold 
him out with a loss of several millions. 

He has been on both sides of the market, 
according as his judgment indicated the 
principal movement to be up or down, and, 
during the bull market that culminated in 
1902, greatly increased his fortune, which 
is supposed to be more than $30,000,000. 

189 



BnDrew Carnegie 

Andrew Carnegie was a Scotchman with 
all of the sturdy honest qualities of that 
great race, combined with the active energy 
of American life. 

At seven he was a messenger boy in this 
country. A few years later he was a tele- 
graph operator. He did well everything 
he undertook to do, but always looked 
higher. 

When he became connected with the steel 
and iron industries, he saw that steel would 
be king, long enough at least for him to 
gain a fortune. He therefore devoted him- 
self to building up an enormous business in 
the manufacture of steel and iron. 

His success was phenomenal and proved 
his good judgment as well as his good man- 
agement- He became the head of that 
industry in this country. 

He was never known as a speculator or 
banker, but Wall Street supplied him with 
the money to gain control of and to perfect 
his plants, and Wall Street, through the 
organization of the Steel Trust by J. Pier- 
pont Morgan, bought his properties at a 
valuation that made him one of the richest 
190 



men in the world, with secure investments, 
out of the reach of speculation. 

Mr. Carnegie was an easy writer and his 
pen contributed much to the discussion of 
political economy. He believed in dispos- 
ing of his riches before he died, and was 
kept busy endowing libraries, schools, and 
colleges, and in other gifts to the people 
here and abroad. 

IRuesell Sage 

While many of our richest men have 
gained their wealth by ventures in stocks 
and bonds, or by developing and improving 
properties that had not been well managed, 
our country, by its remarkable development 
in commerce and trade, offers wonderful op- 
portunities to those who study the condi- 
tions that underlie prosperity. 

There are many also, who, by controlling 
large amounts of money, have been able to 
take advantage of good investments and of 
the demands for cash, and to safely acquire 
enormous profits. 

Perhaps the most remarkable example of 
this class, is Russell Sage, who, for about 
half a century, was a power on Wall Street. 

191 



Beginning life as a poor boy, he early- 
learned the value of money, and, by always 
spending less than he earned, soon had a 
few hundred dollars capital. The money, 
however, was of less value to him, than the 
habit he had acquired of always living 
within his income, and, as his wealth in- 
creased he became known as the great money 
lender of Wall Street and was noted as a 
seller of " privileges," which he usually 
sold with a judgment that proved profitable. 
He probably controlled more ready money 
than any other man in America. 

He was a Presbyterian and lived a simple, 
honest, upright life, free from the weak- 
nesses and follies that too often characterize 
great wealth. 

While he never attempted to control large 
corporation®, he studied their conditions and 
thus made wise investments. 

He was seldom known to contribute much 
to charitable purposes, but Mrs. Sage was 
greatly devoted to such work, and was asso- 
ciated with Miss Helen Gould in many good 
enterprises. 



192 



